Toll NZ receives waiver over debt refinancing

11.30am

Rail operator Toll NZ has received a NZX waiver from gaining shareholder approval to refinance $269 million of debt held by its majority owner, Australia's Toll Holdings.

Toll Holdings which owns 84.2 per cent of Toll NZ (TNZ), formerly Tranz Rail, said key elements of the rail company's existing debt facilities needed to be refinanced over the next three to six months.

In addition, TNZ has signalled it require working capital to finance a significant capital expenditure programme.

TNZ has $268m of debt repayable within 12 months. Toll will provide TNZ a $300m facility at 2 per cent over the 90 day bank bill rate -- 6.75 per cent at present.

The debt includes $77m provided by Toll Finance (NZ) for early termination of the Aratere ferry lease and repurchase of that vessel; $50m provided by Toll Group (NZ) to repay a $44m secured deposit from the Crown and to provide working capital; $55m provided by Toll Finance (NZ) to repay cash advances and provide working capital; and $18m provided by Toll Finance (NZ) to replace the debt facilities of Tranz Scenic 2001 Ltd.

In addition, TNZ had $100m of unsecured notes which are due to be repaid this month.

Toll Holdings said TNZ's existing debt was in addition to capital injections made by the Crown and Toll Holdings as a result of agreements covering ownership and upgrading of the rail network and rolling stock.

TNZ said turbulent in its shares until Toll secured its stake and its poor CC credit rating meant that securing finance from its parent a better option than going to banks.

TNZ will have to sign a negative pledge to secure its new facility.

It said lender requirements which required TNZ to repay in aggregate $179m of principal between June 2001 and June 2003 had resulted in tight liquidity.

The new funding facility would offer TNZ the chance to make considerable cost savings by joining a self insurance scheme offered by the Accident Compensation Corporation as part of ACC's Partnership Programme for accredited employers.

TNZ said an independent report from Macquarie New Zealand showed the facility was on a commercial and arms-length basis.

Macquarie's report said TNZ would only be able to refinance its debt alternatively if it agreed to "onerous securities arrangements including restrictions on the sale and purchase of assets; third party financial monitoring; asset security arrangements and a requirement to repay principal in certain circumstances where doing so could cause financial distress for TNZ".

The NZX Regulation committee (NZXR) waiver applies to a rule where connected entities could get favourable treatment or there may be a perception of favourable treatment.

NZXR said it was satisfied the facility was more beneficial to TNZ and its shareholders compared to any alternative loan.

It was also satisfied the loan was commercial and at arms-length.

"The mischief for which Listing Rule 9.2 aims to address is not triggered by TNZ obtaining the facility from Toll Finance as any benefit in terms of interest paid to Toll Finance on that Facility is outweighed by the benefit obtained by TNZ receiving the facility."

The waiver had been delayed until TNZ's independent directors had confirmed the deal was negotiated on arms length commercial terms and was in the best interests of TNZ and its minority shareholders.

Toll shares rose 5c to $2.75 on market today.

- NZPA