Monday 07 May 2018 by FIIG Research At FIIG

New issue - Plenary to issue $62m subordinated notes

Plenary has launched a new six year, subordinated note issue available exclusively through FIIG


Plenary Bond Co Pty Ltd, the financing vehicle for Plenary Group Holdings Pty Ltd (Plenary) is seeking to issue $62m subordinated notes with a final maturity in May 2024, paying a fixed rate of 6.50% per annum. Exclusive to FIIG, the new bond will refinance and extend Plenary’s existing $35m bond due June 2021, which has amortised down to $31m.

Plenary is well known to many FIIG investors, however for those less familiar the group is recognised as Australia’s leading independent sponsor, investor, developer and operator of public infrastructure projects commonly known as Public Private Partnerships (PPPs). Founded in 2004, the group has participated in 44 infrastructure projects across Australia and North America worth A$32bn, spanning a number of industry sectors including defence, education, health, justice, tourism, and transport.

The bond is available to wholesale investors looking to lock in a fixed rate of return and/or looking to diversify their fixed income exposures.

The bond
Issuer Plenary Bond Co Pty Ltd as trustee for the Plenary Bond Finance Unit Trust
Parent guarantor Plenary Group Holdings Pty Ltd
Type Fixed
Rate 6.50%
Structure Structurally subordinated
Maturity  May 2024 
Payment Semi annually 
Minimum investment amount A$50,000 

Offers for the notes close 10:00am on 9 May 2018.

Plenary is the parent guarantor and the holding company for the group, and holds all of Plenary’s Australian PPP interests. The 2024 notes will have security over the equity interests in nine of Plenary’s 14 Australian PPPs as outlined in Figure 1 below.

Despite the 2024 notes being secured over the group’s equity interests in nine projects, it is important to note that each of these projects have issued senior secured debt rated investment grade, so investors in the 2024 notes are structurally subordinated to the projects’ secured lenders. If one project defaults, the project lenders would likely enforce the direct security they have over the project assets, which would materially reduce the value of the equity interest securing the 2024 notes.

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Source: FIIG Securities
Figure 1

Note [1]: Ownership 100% unless otherwise indicated
Note [2]: Trustee & Dormant companies as well as detailed company structures are excluded from this diagram
1. Plenary Group Singapore Ltd has a nominal holding of less than 1% in Plenary Schools Holdings Unit Trust (PSHUT)
2. Notes will only have a charge over 50% of the equity in PSHUT

Figure 2 below shows the payment flow for each of the nine PPPs. Cashflow supporting the notes are highlighted in yellow. 

Figure 2

Figure 3 shows the contribution of each of the nine projects to the overall notes cashflow.

Source: Plenary, FIIG Securities
Figure 3
- GCLR - Gold Coast Light Rail
- MCC - Melbourne Convention Centre
- VCCC - Victorian Comprehensive Cancer Centre
- LEAP 2 - accommodation units at 14 defence force bases in every Australian Mainland State and Territory
- BRC - BC Cancer Agency for the North
- LEAP 1 - base rooms at defence force bases at Holsworthy, Sydney NSW
- QPS - Queensland Schools Project
- SAPOL - South Australian Police and Courts 

About Plenary

Plenary has established strategic alliances with strong partners that is a key part of its success, including Caisse de dépôt et placement du Québec (CdPQ), Palisade Investment Partners, UniSuper, Partners Group, Marubeni and Morrison & Co.

CdPQ is one of Canada’s leading institutional investors managing more than CAD298bn in assets, and is a long standing partner of Plenary, having invested more than AUD200m in seven Plenary projects since 2012. In 2016, it acquired a 20 per cent stake directly in Plenary’s Australian business, indicating its support for Plenary as a platform for infrastructure investment in Australia. CdPQ is a highly experienced infrastructure investor, taking an active and conservative approach to the oversight of its investments.

In a typical project, Plenary, generally alongside two or three other long term investors, will be granted a long term concession by a Federal or State government entity for the construction, financing and operation of a public infrastructure. Plenary and its co-investors will subscribe to the equity and the project will raise senior secured external debt, generally in the proportion of about 80 to 90% debt, and 10 to 20% equity. Repayment of the project level debt and equity distribution is usually funded by regular contracted payments from the government entity, typically starting upon completion of the construction.

These bonds are being offered to FIIG wholesale qualified investors. If you are not yet an investor or want to find out about qualifying as wholesale, please call Chris IP on 1800 01 01 81.