Tuesday 16 June 2015 by William Arnold Company updates

Leighton Holdings/CIMIC Group launches tender offer

Update 22 June 2015:  Upon close of the tender period, CIMIC announced that it will buy back about US$300m of the US$500m line. With about US$200m still outstanding the line continues be quite liquid and readily traded. View the ASX release.

CIMIC Finance (USA) Pty Ltd (formerly Leighton Finance USA) has announced a tender offer for its outstanding US$500,000,000 5.950% Guaranteed Senior Notes due 2022. The offer is made on an “any and all” basis meaning there is no minimum/maximum amount being tendered.

Full details on the offer can be found here, and our most recent company update on the FY14 results can be found here.

The offer was made with a 2.4% premium (31bps tighter) to market pricing. The securities are now trading around the tender levels at circa $109.

The company is making the offer as an exercise of “balance sheet management”. The group has been progressively improving its credit profile mostly via divestment leading to debt reduction. This is a continuation of the process. CIMIC said the divestment of the John Holland contracting business and the formation of a 50/50 Services investment partnership had generated extra cash that would support the buyback.

All holders of securities subject of the tender will receive an official notification from our Custodial Services team with what is required should they wish to participate in the tender. The tender offer expires on 19 June 2015.

Clients may wish to accept the tender and take the premium on offer, noting that depending on how much of this line is repurchased it could leave the security with much less liquidity meaning it could become difficult to trade going forward. However given the company continues to improve its credit profile the possibility of a ratings upgrade in the future could see the security rally further.

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