Wednesday 10 October 2018 by FIIG Research Company updates

Company updates – Centuria, Ensco, NEXTDC

Centuria Capital new issue, Ensco, NextDC’s APDC takeover, new and updated Factsheets

Centuria Capital– new issue

Centuria Capital No. 2 Fund (Centuria) is launching a new transaction, seeking to raise up to AUD100m of senior secured notes maturing in April 2023. The transaction will include one floating rate tranche and one fixed rate tranche, both offering a yield in the region of 6.50%.

Centuria is a 100% owned and the proposed notes guaranteed by Australian ASX listed specialist investment manager, Centuria Capital Group.  Centuria Capital Group has AUD4.9bn in funds under management at the end of FY18. Centuria itself holds strategic equity investments in a number of listed and unlisted property investments, including Centuria Industrial REIT (ASX: CIP), Centuria Metropolitan REIT (ASX: CMA) and Propertylink Group (ASX: PLG). As at FY18, Centuria’s total assets were AUD405m, equivalent to a loan-to-value (LTV) of 30.5%.

Centuria is launching this debt transaction concurrently with equity raisings by Centuria Group and CMA for the acquisition by CMA of the Hines Global REIT’s Australian office portfolio. This portfolio comprises four prime office assets in Sydney, Melbourne and Brisbane. CMA will acquire 100% of three assets and 25% of the remaining asset, for a total consideration of about AUD560m. CMA will seek to raise about AUD290m, with Centuria looking to subscribe for its entitlement (and potentially more). This will be funded by the notes, as well as proceeds from the equity raising by Centuria Group.

Further details of the transaction are available here.

Ensco – Merger with competitor Rowan Companies

Offshore drilling company Ensco plc announced on 8 October 2018 it had agreed to merge with one of its competitors, Rowan Companies Plc in an all stock transaction. The transaction is expected to close in the first half of 2019. Once completed, the group will have a combined fleet amongst the highest quality in the industry and a revenue backlog of about USD2.7bn, equivalent to about 12 months’ revenue on a pro-forma basis. The combined group will have about USD3.9bn of liquidity, including USD1.9bn of cash. Debt maturities are limited until 2021, with an average of USD110m of debt repayment due in each of the next three years.

Following the merger announcement, Moody’s placed Ensco’s rating on review for downgrade, citing very high leverage but also noting the improved business profile given the group’s larger size. Moody’s indicated any downgrade would, in all likelihood, be limited to a single notch. S&P took the opposite action, placing the rating on review for upgrade, citing causes primarily due to increased scale as well as integration savings. It is unlikely both ratings will be either confirmed at current levels or downgraded / upgraded until the merger is completed.

NEXTDC – Takeover of APDC considered credit positive

NEXTDC Ltd has advised it has agreed terms to acquire the remaining 70.8% of the Asia Pacific Data Centre Trust (APDC). APRDC owns three datacentres located in Perth, Sydney and Melbourne which NEXTDC rents from it. The company has been trying to take back control of the assets for over a year.

We consider the agreement credit positive and in line with NEXTDC’s strategy to maintain ownership of its datacentres. The agreement will save approximately AUD14m in annual rent and potentially lower funding costs if offering the property as security.

Read the full update here.

New and updated Factsheets

All new and updated Factsheets are now accessible under the relevant company name here.