News

Aurizon Holdings Limited (“Aurizon”) today announced that it will implement stand-alone debt facilities at both Aurizon and its subsidiary, Aurizon Network Pty Ltd (“Aurizon Network”), creating a transparent and sustainable financial structure with debt placed appropriately against the regulated Central Queensland Coal Network (CQCN) and with the ability to further diversify funding sources in the future.

New committed debt facilities of $3.0 billion will be placed in Aurizon Network. Of this, $2.2 billion is expected to be drawn initially, with the undrawn balance available to fund committed expansion projects including the Wiggins Island Rail Project. Aurizon Network leases, manages and operates the regulated CQCN and undertakes related services including construction and infrastructure maintenance.

These arrangements follow the review of its capital structure (which consisted solely of bank debt facilities at the holding Company level with maturities in December 2014 and December 2015) announced by the Company at its 2013 half year presentation. The review was focussed on determining an effective long term capital structure for Aurizon in line with the Company’s ongoing debt strategy to balance diversity and maturity of funding sources and the cost of financing while delivering funding flexibility to Aurizon and its shareholders.

Additionally new committed debt facilities of $600 million will be established at the Aurizon Group level through its finance vehicle, Aurizon Finance Pty Ltd. Of this, $240 million is expected to be drawn initially at Aurizon.

Proceeds from the debt facilities will in part be used to repay borrowings under Aurizon’s current $3.0 billion debt facilities which were put in place at the time of the QR National Initial Public Offering in November 2010 and were drawn to $2.4 billion as at 31 December 2012. Following the transaction, Aurizon expects to retain its current BBB+/Baa1 credit ratings and Aurizon Network is expected to obtain the same BBB+/Baa1 credit ratings.

Aurizon Managing Director & CEO Lance Hockridge said Aurizon was listed in 2010 with a relatively short-term vanilla debt structure at the holding Company level.

“As a regulated asset with stable long-term revenues, Aurizon Network is suited to bearing its own debt load. The proposed structure funds the regulated Aurizon Network asset with gearing broadly in line with the regulator's assumed 55% gearing, de-risking the impact of WACC determinations on the earnings of Aurizon Network while also employing a prudent capital structure,” he said.

Mr Hockridge said implementation of an appropriate debt structure for Aurizon Network also provides the flexibility to consider other funding initiatives for Aurizon and enables the Company to diversify its funding sources.

The new financial structure provides Aurizon with the flexibility to introduce a minority equity interest in Aurizon Network, allowing Aurizon to redeploy capital from the regulated business into either capital management initiatives or funding value accretive growth projects to the extent that such opportunities are identified.

To this end, as part of its capital structure review, Aurizon has engaged with a limited number of potential investors in relation to the possible issue of a minority equity interest in Aurizon Network. Aurizon anticipates that any equity interest would include governance rights commensurate with the level of minority equity acquired, including representation on the Aurizon Network Board and consent rights in relation to certain significant corporate matters. However, there is currently no transaction and there can be no guarantee as to the terms or timing of any minority issue or that it will eventuate.

The refinancing does not impact Aurizon’s ability to operate its current business model of providing integrated rail solutions to customers across Australia and a key criterion of any minority equity issue will be that Aurizon continues to be able to provide integrated rail solutions to its customers. As part of the refinancing, two divisions which are currently within Aurizon Network, Engineering and Project Delivery and Specialised Track Services, will move to Aurizon, establishing appropriate ongoing stand-alone operating structures for Aurizon and Aurizon Network. The proposed restructure will not involve a reduction in staff numbers. Aurizon proposes to consult with affected employees and unions commencing on Tuesday, 14 May 2013.

Aurizon and Aurizon Network plan to execute a number of agreements under which they will provide each other ongoing operational services on commercial terms, ensuring that Aurizon continues to operate as it does today.

Aurizon expects the new debt facilities to be in place by the end of the 2013 financial year.

For more information on Aurizon Network’s operation and management of the CQCN, please visit Aurizon’s website www.aurizon.com.au

For further details:

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Email: media@aurizon.com.au