Transfield Services completes debt restructure

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Transfield Services completes debt restructure

Transfield Services Limited announced in mid May the finalisation of its debt refinancing strategy with the settlement of US$325 million of senior unsecured notes in the United States, maturing in May 2020.

In addition it has completed approximately A$400 million of senior secured syndicated bank facilities in various currencies, maturing in July 2017.

The company's existing United States private placement notes and various other working capital facilities will also be secured. These transactions achieve the following objectives:

  • address the A$275 million of debt maturities due in December 2014;
  • doubled the average debt maturity profile to over 4 years from 2 years currently;
  • increase the company's flexibility via improved debt covenants;
  • diversify the company's funding sources; and
  • obtain corporate credit ratings from S&P (BB) and Moody's (Ba2).

Graeme Hunt, Transfield Services Managing Director and Chief Executive Officer, said:

"This significant restructure of our debt facilities puts Transfield Services' capital structure on sound footing, improves our freedom to focus on operations and importantly enables us to make portfolio decisions only when they are in the interests of our shareholders."

"We reaffirm our commitment to reducing leverage levels to 2.0 times Net Debt to EBITDA in a structured and considered manner. This will be via the application of net operating cash flows and proceeds from ongoing asset rationalisation to the retirement of debt, as well as via earnings growth."

The US$325 million of senior unsecured notes will attract a coupon rate of 8.375 per cent, and will be swapped back to Australian dollars.As a guide the company's effective interest rate across all debt facilities will increase by approximately 150 basis points to circa 9.0 per cent (inclusive of coupon rate, transaction costs and swap charges). While this represents an increase in interest rate, overall business expenses in FY2015 are not expected to be materially higher than FY2014 given that the higher interest rate is expected to be offset by a lower level of debt and a lower cost base.

DLA Piper assisted Transfield in the refinancing process. Melbourne-based partner Bill Glover led the Australian team that advised Transfield Services Limited on the issue and sale of US $325 million senior unsecured guaranteed notes in the United States and international capital markets. Sydney-based partner, Hugo Thistlewood, led the team that advised Transfield Services on its approximately AU $400 million of senior secured syndicated bank facilities in various currencies.

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