Fletcher Building Ltd has decided to repay $US300 million of US private placement notes early.
Chief executive Ross Taylor said yesterday the notes, issued to US investors in 2012 and due to mature in 2022 & 2024, were the company’s most expensive source of debt with an average cost of funding of 5.4%.
This transaction doesn’t affect the company’s 2016 US private placement notes, which have a much lower cost of funding and provide longer-term tenor in the company’s debt facilities, with maturity dates in 2026 & 2028.
Mr Taylor said repaying the 2021 notes would reduce Fletcher’s funding costs by about $NZ17 million/year, while leaving the company with about $NZ1.1 billion of liquidity.
The 2012 US private placement notes have a notional value of $US300 million. But, after taking account of foreign exchange & interest rate derivatives Fletcher holds in respect of them, Fletcher expects the repayment amount to be about $NZ350 million.
Mr Taylor said the repayment included a ‘make whole’ cost as a result of the early termination of the debt, but the favourable unwind of its interest rate derivatives would partially offset that debt.
“The net cost of these 2 amounts is expected to be about $NZ30 million, which is included in the total expected repayment of about $NZ350 million. The early repayment costs are more than offset by the avoidance of about $NZ40 million of future interest payments.”
Fletcher will repay investors in late July from its cash reserves.
Attribution: Company release.