Deal gives Qantas right to stop debt repayments
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Deal gives Qantas right to stop debt repayments
Deal gives Qantas right to stop debt payments
March 12, 2007
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QANTAS will be able to switch off interest payments at any time and without immediate penalty on the massive $10 billion of debt being raised by the private equity consortium to buy the airline and fund its future activities.
The complex lending package, for which global marketing will begin this week after the Federal Government removed the last political hurdle from the takeover, will allow the airline to add the interest payments to its initial loan - without repaying a dollar - for up to 10 years if necessary.
The suspension clause is designed to give the company's management breathing space if Qantas encounters a severe financial downturn due to events such as terrorism or pandemics.
Qantas will only have to give notice to lenders that it is suspending interest payments rather than obtaining their permission. These payments will be added to the main debt in the form of bonds.
While the 10 year period will be the maximum, it is not expected that Qantas and its proposed private equity owner, Airline Partners Australia, will need it given the fairly short space of time it has taken the industry to recover from previous disasters.
The flexibility over interest payments is a major component of a funding deal described by its architects as "covenant lite", showing how the Qantas's new owner has used its negotiating clout to achieve fewer financial constraints.
Marketing the debt package will be significantly stepped up from today by the six major lead underwriters, Deutsche Bank, Morgan Stanley, Citigroup, Goldman Sachs, Royal Bank of Scotland and Calyon.
The fund raising includes $7.6 billion to fund the initial acquisition through the current $5.60 a share offer due to close on April 3. Debt facilities worth another $2.4 billion are being raised for working capital and capital expenditure.
Australian retail investors will also be able to participate in the fund-raising for the Qantas takeover with the planned issue of $500 million "subordinated notes", which parcel debt into a listed note.
The bankers will be aiming to syndicate the senior debt to between 100 and 200 individual lenders around the world with most of the money coming from the US.
European banks are likely to provide about 20 per cent with another 10 per cent coming from Asian institutions.
The "group of six" lenders expect that no one institution will be aiming to take more than $75 million on to their balance sheets, the spread of which will help alleviate financial pain if Qantas goes bung.
However, the major Australian banks are not expected to sign up for much given their increasing reluctance to be exposed to private equity firms' debt plays........
I wish I could get my bank manager to agree to that sort of clause in my mortgage.....
March 12, 2007
Other related coverage
QANTAS will be able to switch off interest payments at any time and without immediate penalty on the massive $10 billion of debt being raised by the private equity consortium to buy the airline and fund its future activities.
The complex lending package, for which global marketing will begin this week after the Federal Government removed the last political hurdle from the takeover, will allow the airline to add the interest payments to its initial loan - without repaying a dollar - for up to 10 years if necessary.
The suspension clause is designed to give the company's management breathing space if Qantas encounters a severe financial downturn due to events such as terrorism or pandemics.
Qantas will only have to give notice to lenders that it is suspending interest payments rather than obtaining their permission. These payments will be added to the main debt in the form of bonds.
While the 10 year period will be the maximum, it is not expected that Qantas and its proposed private equity owner, Airline Partners Australia, will need it given the fairly short space of time it has taken the industry to recover from previous disasters.
The flexibility over interest payments is a major component of a funding deal described by its architects as "covenant lite", showing how the Qantas's new owner has used its negotiating clout to achieve fewer financial constraints.
Marketing the debt package will be significantly stepped up from today by the six major lead underwriters, Deutsche Bank, Morgan Stanley, Citigroup, Goldman Sachs, Royal Bank of Scotland and Calyon.
The fund raising includes $7.6 billion to fund the initial acquisition through the current $5.60 a share offer due to close on April 3. Debt facilities worth another $2.4 billion are being raised for working capital and capital expenditure.
Australian retail investors will also be able to participate in the fund-raising for the Qantas takeover with the planned issue of $500 million "subordinated notes", which parcel debt into a listed note.
The bankers will be aiming to syndicate the senior debt to between 100 and 200 individual lenders around the world with most of the money coming from the US.
European banks are likely to provide about 20 per cent with another 10 per cent coming from Asian institutions.
The "group of six" lenders expect that no one institution will be aiming to take more than $75 million on to their balance sheets, the spread of which will help alleviate financial pain if Qantas goes bung.
However, the major Australian banks are not expected to sign up for much given their increasing reluctance to be exposed to private equity firms' debt plays........
I wish I could get my bank manager to agree to that sort of clause in my mortgage.....
