Z Energy bond issue close

Infratil, NZ Super Fund's Z Energy set to seek about NZ$150m from 7-year retail bond issue

27th Jun 11, 3:57pm by Gareth Vaughan

By Gareth Vaughan

Z Energy, the company that operates more than 200 Shell petrol stations, is expected to this week unveil its second bond issue, seeking about NZ$150 million through a seven-year issue to retail investors.

Interest.co.nz understands Z, owned by Wellington-based infrastructure investor Infratil and the New Zealand Superannuation Fund, has appointed ANZ, Westpac, Forsyth Barr and First NZ Capital to manage and organise the issue. A prospectus is expected to be registered this week with a roadshow following next week.

Z said last month that it was planning a second bond issue. The company said any issue would likely be on similar terms to the issue of secured bonds undertaken in 2010, with bondholders sharing the same security as Z's banks, on an equal ranking basis.

Infratil and the Super Fund bought the business, formerly global oil giant Shell's New Zealand downstream operations (or fuel retail and distribution business), for NZ$696.5 million in April last year.

Z consists of a 17.1% stake in Marsden Point oil refinery operator the New Zealand Refining Company, a 25 % stake in Loyalty New Zealand which runs Fly Buys, some 220 petrol stations, about 100 truck stops, plus pipelines, terminals and bulk storage terminal infrastructure around the country.

In its annual results last month Infratil said its 50% stake in Z, which cost NZ$210 million, contributed an "exceptional reported return" of NZ$116 million comprising NZ$55 million of earnings and NZ$61 million through asset revaluations. On a current cost of supply basis Z’s earnings before interest, tax, depreciation, amortisation and financial instruments was NZ$20 million higher than achieved in its last year of Shell ownership, notwithstanding transition costs and the disruption resulting from the February 22 Christchurch earthquake, Infratil added.

Last year Z raised NZ$147 million through a six year retail bond issue to about 3,500 investors paying annual interest of 7.35%. Proceeds from that offer were used to repay some of Greenstone's NZ$350 million worth of bank debt held by ANZ, BNZ, HSBC and Westpac. Proceeds this time around are likely to be used to reduce bank debt further.

Both Infratil and the Super Fund coughed up NZ$210 million to buy the Shell business with the balance of the price - NZ$285 million - funded with bank debt.

Like last year's issue, the new bond issue from Z is unlikely to carry a credit rating.

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15 Comments

by Gareth Vaughan | 27th Jun 11, 4:00pm 1309147246

Z filed some 15 month financial statements to the NZX today - http://file.nzx.com/000/208/5197208.pdf

by andyh | 27th Jun 11, 5:32pm 1309152771

Why no credit rating?

by steven | 27th Jun 11, 8:47pm 1309164474

Because they are worse than junk?

;]

regards

by Gareth Vaughan | 28th Jun 11, 8:47am 1309207620

Infratil founder Lloyd Morrison is no fan of the credit rating agencies. As I understand it, that's the primary reason no entity associated with Infratil gets one. You can see more from Morrison in this Double Shot interview - http://www.interest.co.nz/news/52593/lloyd-morrison-interview

by steven | 28th Jun 11, 9:53am 1309211627

I think you deleted my comment off JB's......did you mean to?

I can agree with Lloyd M. to an extent, I think ratings agencies are pretty useless, the CDS fiasco has proved that....

However, Infratil is selling us a fossil fuel fix we soon wont be able to afford on the scale they need to have a going concern IMHO.

In which case from what's been said, I would consider them no more than risky junk....they dont have a long term sustainable business in a future that cant sell enough cheap petrol.

Also have you considered what would happens to their business(es) if/when petrol/deisel rationing starts?

Shell were very smart to get out of retailing petrol...indeed that has been a trend for Exxon etc...you should be asking yourself why. For me its because they know full well there are no good margins left and will have too many forecourts and not enough fuel sales in future so have jumped out. What is left is the independants or front organisations retailing petrol and they face taking a huge contraction in their business, but many have too much debt and who wants forcorts these days?. In Infratil's case from what Ive read on their mix of companies a lot of their business is at this risk...

Also their notes, when it comes back to get your money back time can be converted to shares....this means lots of ppl selling shares into a over-supplied market.....hello capital losses.

regards

by Gareth Vaughan | 28th Jun 11, 9:58am 1309211930

Sorry, Steven. Your previous comment must have gone because it was posted as a response to JB's.

by steven | 28th Jun 11, 10:24am 1309213475

Also extra taxation in the form of ETS to "combat" global warming....these have to be coming.....all this just adds up to a world of pain for petrol retailers IMHO.....

I seem to recall Infratil had someone over claiming Peak Oil etc wasnt an issue? just have to wonder when they get someone with a minority view to front for them about how "honest" they are being....for me it was a huge alarm bell and the convincer not to invest.....

regards

by powerdownkiwi | 28th Jun 11, 11:56am 1309219005

Steven - probably - it goes with the territory. These folk can't handle the thought that all their dreams might be based on a false promise.

by steven | 28th Jun 11, 12:39pm 1309221562

Its a sad thing though when some of our so called "best" business ppl think the happy times are never ending...or there are no land mines....

Like I said with Exxon, when the big oil giants decide to bail from profitable retailing you just have to wonder why, and on those who step up to take on such "sweet deal"......

Now I can understand the likes of GBH finding it impossible to accept what I/we are saying due to political blinkers, but not only that, he suggest its a good uh...bet.

regards.

Steven

by Gareth Vaughan | 28th Jun 11, 8:52am 1309207922

JB, we have deleted your comment. Please remember: We welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments

by powerdownkiwi | 28th Jun 11, 9:42am 1309210941

Well, Gareth, how about some truths?

Infratil is gobbling up existing infrastructure - yes?

Not creating new.

It is in some part, prizing that out public ownership.

It expects to make a profit, and in turn, so will the bond-purchers.

This, then, is partly about the upward migration of 'wealth'. The previous owners could, all things being equal, vote for a non-profit operation (and post-peak, that's what more and more will be).

But:

They have bough Shell's outlets.

http://www.theoildrum.com/node/3548

I'd say Shell knew what they were doing. You don't keep getting blood out of stones, that goes for consumers pockets, curtailed by the availability of energy at one end, and goes for the black blood at the other.

I think energy is one of the sure bets, but I wouldn't go this way........

by steven | 28th Jun 11, 10:43am 1309214598

And its becoming pretty clear we wont be seeing the blueprint model he thinks is possible, primarily because I dont think he's seeing all the other issues we face at the same time, or not contemplating them.

Interesting that the G20 is talking similar with food, but that will fall flat as well.....if India or Thailand face shortages or price spikes for rice they will simply stop or make exports too expensive....

regards

by Gummy Bear Hero | 28th Jun 11, 11:49am 1309218581

One gets a warm inner glow that capitalism , although attacked , maligned and abused by the Helen Clark Labour government for 9 lamentable years , is finally recovering , under the capable stewardship of Jolly Kid and Wild Bill .

...... Infatil has demonstrated how Kiwis can be successful . The company has turned the Shell fore-courts into a profitable enterprise . Bravo Lloyd Morrison .

And for those who bother to read the annual report 2011 , the company Infratil has has another stellar year , boosting it's top-line revenues by 17 % , it's NTA by 14 % , and it's net profit by 26 % .

......... Just $ 1.78 gets you a share of the action . Do yourselves a favour , pop over to Weldonia ( NZX : IFT ) , and grab a bargain . ...... There's the sweetener of a grossed up dividend of 5.8 % if you do .....

by steven | 28th Jun 11, 12:32pm 1309221129

oh boy......

regards

by Gareth Vaughan | 29th Jun 11, 12:37pm 1309307843

Confirmation of the offer now out. The 7-year bonds will pay 7.25% per annum.

Z Energy announces a bond offer to New Zealand investors

Z Energy Limited ("Z Energy", formerly Greenstone Energy Limited), has today registered a Simplified Disclosure Prospectus for an offer of up to NZ$100 million bonds (with the ability to accept oversubscriptions of up to NZ$50 million).

The offer is expected to open on Friday 8 July 2011 and to remain open until 5 August 2011 (unless extended by Z Energy).

The bonds will have an interest rate of 7.25% p.a. and will mature on 15 August 2018.

Z Energy is pleased to be offering bonds to New Zealand investors, following its successful inaugural bond offering in 2010. This represents an opportunity to invest in an emerging

Kiwi brand, supported by 100 years of heritage and a track record of market leading performance.

The bonds are secured senior obligations of Z Energy and will rank equally with each other and the existing series of bonds issued by Greenstone Energy Finance Limited (in respect of which Z Energy has become the substitute issuer).

The bonds are unconditionally guaranteed by Z Energy, Aotea Energy Limited, Greenstone Energy Holdings Limited, Greenstone Energy Finance Limited, Harbour City Property Investments Limited, Big Tree Stations Limited and Mini Fuels & Oils Limited (“Z Energy Group”). The ultimate joint owners of the Z Energy Group, New Zealand Superannuation Fund and Infratil, do not guarantee the bonds. The Z Energy Group's banks and bondholders share the same security over Z Energy’s and the guarantors' assets on an equal ranking basis. This security ranks behind Shell's security over petroleum products that Shell has supplied for which it has not been paid, and their proceeds, and statutorily preferred creditors.

Interest will be paid quarterly, with the first interest payment date scheduled to occur on 15 August 2011.

The first interest payment will be interest to the original subscriber (ITOS) and include early bird interest earned on subscription monies from the date these are banked into the offer trust account.

The Joint Lead Managers for this issue are:

ANZ National Bank Limited 0800 269 476

First New Zealand Capital Securities 0800 005 678

Forsyth Barr Limited 0800 367 227

Westpac Institutional Bank 0800 489 222

Applications for the bonds can only be made using the application form included in the Simplified Disclosure Prospectus for the bonds. Investors should contact any of the Joint Lead Managers or their financial advisor to request a copy of the Simplified Disclosure Prospectus or secure an allocation of the bonds.

No applications for bonds issued by Z Energy will be accepted or money received unless the subscriber has received the Simplified Disclosure Prospectus for the offer. The minimum application amount in respect of the bonds is NZ$5,000 and in multiples of NZ$1,000 thereafter.