Tuesday 27 March 2018 by FIIG Research Company updates

Company updates – Glencore, Liberty, RSEA, Sydney Airport

This week, Glencore wins court battle over Newcastle port fees, Liberty has a new fixed rate bond, ICG backs management buy out of RSEA and Sydney Airport full year results

ICG granted exclusivity for management backed buy out of RSEA

On 27 March 2018, the Australian Financial Review reported that Intermediate Capital Group (ICG) is backing a management buy out of RSEA. The article states that it has been granted exclusivity following a two stage auction process, and that a deal is “expected in the coming weeks”.

The bond may be called as part of any sale. The bond is callable on each quarterly interest payment date. RSEA must give at least 30 days (and not more than 60) notice of its intention to redeem its Notes.

The following details 2018 call dates which are all at AUD102 and the related yield at the current indicate mid-price of AUD102.2.

  • 27 April 2018: 3.94%pa
  • 27 July 2018: 6.68%pa
  • 27 October 2018:  7.07%pa

We also note that upon the occurrence of a Change of Control, each Noteholder will have the right to require the Issuer to redeem all or any part of such Notes at a redemption price of AUD101.  Change of Control means an event where a party which held 50% or less of the issued shares, subsequently holds more than 50%.

High Court backs Glencore on Newcastle port fees

On 25 March 2018, the Australian Financial Review reported that Glencore secured final victory in its three year dispute with the Port of Newcastle. The High Court of Australia rejected the port operator’s attempt to increase port fees. The port operator’s request for a review of successive decisions that install the Australian Competition and Consumer Commission (ACCC) as the price regulator was also rejected by the court. Post privatisation, the owners of the Newcastle Port had attempted to significantly increase port fees, to which Glencore disputed the decision at court.

"This is good news for all NSW coal exporters as it helps maintain our industry's international competitiveness and justifies Glencore's determination to ensure that monopoly export infrastructure is subject to appropriate regulatory constraint," the miner said.

We note this decision has no impact on the B+ S&P rated NCIG 12.5% August 2031 USD bond available at FIIG – yield to worst of 7.97%pa. The fees disputed by Glencore are the channel fees and are unrelated to NCIG Holdings (or PWCS, the other coal terminal in Newcastle).

The following Glencore bonds all rated BBB (S&P) are available to trade:

  • Glencore 4.50% September 2019 AUD bond – yield to worst 2.48%pa
  • Glencore 4.95% November 2021 USD bond – yield to worst 3.33%pa

Liberty Financial new issue

This week, Liberty Financial launched a three year medium term note and FIIG has a primary market allocation.

Brief company details:

  • Diversified non bank financial services across mortgage, insurance, motor, commercial, equipment finance, personal loans and NZ
  • Founded in 1997, currently has 300 staff
  • Unblemished capital markets record
  • Gross asset circa $7bn
  • NPAT $76m
  • Capital ratio 15.5%
  • BBB- (stable S&P) corporate rating
The issue
Issue amount A$[100]m
Maturity date 9 April 2021
Bond type Fixed rate medium term notes 
Structure Senior unsecured
Coupon payment Semi annually in arrears
Yield to maturity Offering circa 5% yield to maturity 
Currency  AUD
Denominations Minimum A$50,000 with A$10,000 increments
Issuer rating BBB- (Standard & Poor's) 
Conditions Coupon step up, negative pledge

The issue will price on 27 March 2018 available to wholesale clients only. 

Sydney Airport full year results

We have provided a report for Sydney Airport full year 2017 results.

Key points:

  • Sydney Airport reported FY17 results late February that were solid and in line with our expectations. EBITDA of AUD1,197m was up 10% on prior period and broadly in line with expectations
  • The continued earnings growth was the result of another year of strong passenger growth, at 3.6%, including international passenger numbers growing at 7.2%. Key Asian destinations remain the driver for this growth, with double digit growth for the key Chinese and Indian markets
  • Sydney Airport’s results were also supported by ongoing lower interest costs as legacy interest rate hedges rolled off and were replacement at lower rates. As a result, the company’s average cash interest rate dropped 40 basis points to 4.9%, compared to 5.3% in 2016

The full report is available on the FIIG website for wholesale clients and retail clients.

The following Sydney Airport bonds are available to trade:

  • Sydney Airport CPI+3.76% 2030 inflation linked bond – yield to worst CPI + 2.95%pa
  • Sydney Airport CPI+3.12% 2020 inflation linked bond – yield to worst CPI + 2.08%pa
  • Sydney Airport 3.63% 2026 fixed rate bond – yield to worst 3.78%pa