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Infratil-Super Fund owned Shell says bonds would rank equal with bank debt

Infratil-Super Fund owned Shell says bonds would rank equal with bank debt

Greenstone Energy, the holding company for the Shell fuel retail and distribution business bought by Infratil and the New Zealand Superannuation Fund in April, has confirmed plans for a retail bond issue worth about NZ$100 million as it looks to pay down bank debt.

Greenstone chief executive Mike Bennetts said documentation for the offer was being developed. Infratil separately flagged in its notice of annual meeting today the issuing of up to NZ$350 million worth of bonds between August this year and August next year.

Bennetts said although a final decision on issuing bonds was yet to be taken, any bonds issued would be of at least six years duration and would be secured with bond holders sharing the same security as Greenstone's banks, on an equal ranking basis.

A bond issue would look to raise about NZ$100 million with the proceeds used to repay some of Shell's NZ$350 million worth of bank debt. A final decision on whether the issue goes ahead would be made by the end of the month with documentation finalised then as well. No mention was made of whether the bonds would have a credit rating or what level of interest they might pay investors.

Infratil and the Super Fund bought Shell’s New Zealand downstream, or distribution and fuel retail business for NZ$696.5 million in April. The deal included a 17.1% stake in the Marsden Point based New Zealand Refining Company, but excluded Shell’s oil and gas assets in New Zealand such as its majority stake in the Maui gas field. However, in a Double Shot interview with last month Bennetts said Greenstone could ultimately expand into oil and gas exploration activities.

Aside from the price paid for the Shell business, Infratil and the Super Fund also have bank facilities in place to cover peak working capital demands that lifts total funding for the deal to more than NZ$1 billion. According to Infratil, the quantity of Shell’s inventory has ranged from 300 million litres of fuel to 650 million litres with its value ranging from NZ$200 million to NZ$650 million over the past five years.

The Shell downstream business last year produced earnings before interest, tax, depreciation and amortisation of NZ$138 million on a current cost basis, which strips out the addition of a  NZ$38 million stock value adjustment. Infratil expects a similar performance this year. Last year’s revenue was NZ$2.15 billion and reported earnings before interest and tax NZ$157 million. Click here to read an Infratil presentation on the Shell business.

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