AGL Energy strikes $500m bond market deal ahead of interim results

AGL Energy has secured about $500m of debt from the US bond market, which it is likely announce with its interim results on Thursday.

AGL Energy is expected to reveal more details surrounding the funding for its coal-related spin off when it delivers its interim results on Thursday.

DataRoom understands AGL recently managed to finalise efforts to raise $500m of debt through the US bond market ahead of its demerger of its coal fired power generation assets, with the entity to be called Accel Energy.

However, the understanding is that the refinancing was no easy feat for the banks involved, which included Bank of America, JPMorgan, Citi and the Royal Bank of Canada.

But it is likely to ease any concerns about a looming equity raising, although analysts at JPMorgan still believe this cannot be ruled out.

The analysts said in a research note that they expect the company to report a 23 per cent slump in its underlying net profit to $168m, adding that some of the key areas of focus will be any indication of more positive earnings conditions given higher wholesale prices.

This includes a potential earnings guidance upgrade for the 2022 financial year and any further information on the assets, including any changes to generation closure dates.

The fall in net profit is due to the impact of lower forward electricity prices leading into the half.

Its estimate compares to full-year guidance of $220m to $340m, which was provided in August.

AGL is due to complete the Accel Energy demerger by the June quarter.

The analysts said that the company may take the opportunity to raise equity and estimate that a raise of $500m at the current share price would be 1 per cent dilutive and a $1bn raising would be 3 per cent dilutive.

DataRoom reported last year that a $500m-plus equity raising could be on the cards ahead of the demerger to offer support for working capital.

However, chairman Peter Botten has said a capital raising was not being contemplated when questioned at the company’s annual general meeting in September.

The company has earlier reassured the market that it believes that the measures it has taken to shore up its balance sheet have been adequate, including a reduction of dividends, based on the recovery of the electricity market.

According to its financial accounts, AGL had $2.98bn of net debt at June 31 and its overall debt level is about 35 per cent.

AGL has earlier said Accel Energy was expected to have up to $800m of bank debt as well as loans to fund working capital and liquidity requirements in the short term, including revolving cash advance and swing line facilities.

AGL is expected to establish bilateral multi option bank facilities in total worth $2bn, complemented by new US private placement notes that would replace the $910m worth AGL currently holds.

Working for AGL has been Macquarie Capital, Goldman Sachs and Gresham.