(Corrects in paragraph 11 to show that Pact Group is controlled
by Raphael Geminder; it is not owned by New Zealand tycoon
SYDNEY May 22 Private equity-controlled power
firm Alinta Energy is planning a $1 billion-plus debt issue in
the U.S. term loan B (TLB)institutional market to refinance
maturing debt, banking sources familiar with the deal said,
joining a growing number of Australian borrowers attracted by
the terms and pricing available.
Alinta, controlled by U.S. buyout giant TPG Capital
, is carrying A$1.2 billion ($1.17 billion) in senior
term loans, an A$400 million super senior loan, as well as
interest rate swaps of around A$210 million on a
marked-to-market basis, according to the sources.
The sources declined to be identified because of the
sensitive nature of the deal. Alinta's spokeswoman declined to
The emergence of the TLB market is causing grief to loan
bankers already grappling with low credit growth in Australia.
"Every domestic Australian bank should be worried about
leakage to this market. It is business we are missing out on,"
said John Corrin, Australia & New Zealand Banking Group's
global head of loan syndications.
U.S. TLB issuance has skyrocketed, driven by a combination
of increased money supply and investors' drive for yield. Total
volume year-to-date hit $282 billion, up 57 percent compared to
the same period last year according to UBS.
Issuance by Australasian borrowers this year hit $3.74
billion, more than double the $1.48 billion of leveraged loans
done in Australia according to Loan Pricing Corp data.
(For a graphic, click link.reuters.com/zuf38t)
The TLB market offers attractive pricing over longer tenors
compared to the Australian bank loan market. Currently borrowers
can refinance seven-year debt in the TLB market for 300 basis
points over Libor, compared with typical three-year leverage
loan refinancing starting at 350 basis points over BBSY -
Australia's bank bill bid swap rate.
The term loan B market is similar to the sub-investment
grade or "junk" bond market in that it offers riskier borrowers
"It maybe attractive for companies going through restructure
or a growth change programme to lock in funding on set terms
which can take the business through challenging times," said
Chris Champion, head of leverage finance at Goldman Sachs
Cinema operator Hoyts, owned by Australia's Pacific Equity
Partners, and packaging firm Pact Group, controlled by Raphael
Geminder, have this week successfully priced debut issues after
cutting the margin.
"Market conditions in the U.S. are very strong at the
moment, and certain issuers can achieve more aggressive
pricing," said Andrew Ashman, director Asia-Pacific loan
syndicate at Barclays in Singapore.
The foreign exchange risk is key for borrowers who do not
have U.S. dollar revenues to hedge the debt repayment.
"The market is a legitimate alternative for Australian
issuers, but you need to be aware of the cost involved in
breaking the foreign exchange swaps for operational or company
reasons," said Alistair Dick, head of debt advisory and
restructuring, Rothschild Australia.
($1 = 1.0233 Australian dollars)
(Reporting by Sharon Klyne; Editing by Eric Meijer)