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Adani turns to bond markets for Abbot Point port finance

Adani turns to bond markets for Abbot Point port finance

CANBERRA: Adani Australia is believed to be tapping the international bond market to refinance its $2 billion Abbot Point port, which will export coal from its Carmichael coalmine in Queensland. Securing debt funding for assets linked to the out-of-favour commodity is difficult. The understanding is that Adani plans to tap the bond market around September, ahead of a loan that matures in about 12 months.

Other coal infrastructure owners have been looking to borrow but banks are shying away from the commodity. However, Newcastle Coal Infrastructure Group, owner of the Newcastle coal export terminal, recently refinanced some of its $3.5bn debt, advised by Rothschild. The company said that each of its existing syndicate of six banks participated in the raise at current or higher levels. Due to demand, it also upsized the US$450m bank facility to US$643m to refinance further debt by including two new commercial banks. Shippers including from the Newcastle Coal Export Terminal in NSW including Yancoal, Peabody Energy, Whitehaven Coal, Centennial Coal and BHP have been paying down the loans via take-or-pay contracts.

Australia’s top four banks are taking a cautious approach, mostly only rolling over existing loans on assets, while European banks are even more reluctant. The outcome of the deal could affect the Wiggins Island Coal Export Terminal, which is currently thrashing out its future and how to repay its $US3 billion-plus ($3.8bn-plus) debt as miners, which own the asset, are struggling to make the interest payments. Talks are back on between the miners and the lenders about a restructure after a recent impasse and the hope is that the debt on the facility will be restructured by the end of the year. One proposal is a deal where the charges to export coal from the terminal are reduced in exchange for writing off the value of the preference shares and junior debt, which would leave the senior debt intact.

The idea is not popular with the preference share and junior debt holders. But the fear is that without such a move, WICET would collapse and they would be left without any value. Among the junior debt and preference shareholders are banks, hedge funds and miners. Glencore is said to have exposure. Caledon, which recently fell into the hands of administrators, holds 15 per cent of the preference shares and they are believed to be in the sights of hedge funds. One third of the senior debt on WICET has already traded and is no longer in the hands of the original lenders. WICET owes $US3bn in senior debt to a lending syndicate, along with $US375m of junior debt and $US400m of preference equity. The debt is paid down through take-or-pay contracts held by the miners, which include Glencore, Wesfarmers, New Hope and Aquila.