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Thursday, 25th April 2024 |
| First private placement for Bord Gais |
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| After a successful €375 million first transaction, Bord Gais would recommend the private placement market to other corporates looking for medium to long-term funding. |
Bord Gáis (BGE) is currently in the process of closing a c. €375 million US Private Placement Transaction. According to Paul Kenny, group treasurer with Bord Gais, the pricing and level of interest achieved by BGE in the market exceeded expectations and the transaction represents one of the most successful private placements of 2003.
'The issue was almost five times oversubscribed and the pricing achieved is some of the lowest achieved by any issuer in 2003, even some with a superior credit rating to BGE,' says Kenny, adding that the proceeds of the issue will be used to finance or refinance the company's capital expenditure program.
The transaction was launched on the 1st of September 2003. Royal Bank of Scotland (RBS) acted as the company's sole agent for the transaction. BGE sought to raise a minimum of $200 million with the potential to increase in size depending on market demand and pricing.
An Information Memorandum and Draft Note Purchase Agreement (equivalent to a loan agreement) were sent to a group of 54 investors based in Ireland, the UK and the US, comprising mainly large insurance and investment management companies. The management of BGE held a roadshow in London and five cities in the US giving investors a presentational overview of the business. Questions were received from investors, both at the meetings and over the subsequent week.
Four tranches were chosen by BGE (7,9,11 and 12 year) to reduce refinancing risk and increase the options available to investors. Due to the level of bids achieved within acceptable price levels, BGE had the opportunity to increase price tension and therefore achieved a reduction in the margins payable.
Pricing in the Private Placement market is done against US Treasuries (US government fixed rate bonds) i.e. investors bid a price against the comparable yield on US Treasuries. The final pricing achieved was 10 to 20bps better than originally anticipated.
The funds raised were mainly fixed rate US dollars and therefore BGE conducted a swap auction which was managed by Ulster Bank to swap the Private Placement funds to floating rate euro. This eliminated US$ currency and US$ interest rate risk. A group of BGE's relationship banks were asked to competitively bid for the swaps and four banks were successful in the swap auction. The floating rates achieved are attractive compared to bank facilities and very attractive compared to capital markets alternatives.
The transaction is due to close on October 22nd. BGE is satisfied with progress to date and would recommend the US Private Placement market as a source of medium to long term funds.
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| Article appeared in the October 2003 issue.
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