AGL taps banks for US bond bid

Both AGL Energy and Origin Energy have seen their share prices fall as their energy retail businesses face market disruption, with consumers generating their own energy through rooftop solar panels.

AGL Energy is believed to have hired a raft of investment banks to tap the bond market in the US for about $500m.

Bank of America, JPMorgan, Citi and the Royal Bank of Canada are believed to be working on the issuance for the energy retailer. Goldman Sachs and Macquarie Group have also been advising AGL.

The understanding is that the plan is to refinance debt worth between $400m and $500m ahead of the demerger of its coal assets, creating a business named Accel Energy.

AGL earlier indicated that it was 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.

Some have expected that a capital raising has been on the cards for AGL Energy, a move the company’s chairman, Peter Botten, dismissed at its annual general meeting.

Sources say raising equity now would not be a realistic option for AGL.

But a concern among some is that a move to tap the bond market could elevate AGL’s debt levels and may place further pressure on the group to raise equity further down the track to appease investors.

AGL’s demerger of its coal-fired power generation division is scheduled to occur by June, and AGL is understood to have been working on a refinancing plan for some time to secure working capital for the spun-off unit.

The company has reassured the market that the measures it had taken to shore up its balance sheet had 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 had 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.

Both AGL Energy and Origin Energy have seen their share prices fall as their energy retail businesses face market disruption, with consumers generating their own energy through rooftop solar panels.

Their coal-fired power generation assets are also deterring investors avoiding large carbon-emitting companies due to environment concerns.

Origin Energy typically holds an investor day in early December or late November, but the event has not gone ahead this year in a move that has raised eyebrows. It is understood an investor day may be on the cards early next year.

Some considered the lack of an investor day as a sign something was afoot.