Z Energy says timing not right to sell more bonds

Z Energy cancels plan for another bond sale, says timing ‘not right

July 29 (BusinessDesk) – Z Energy Ltd., the chain of petrol stations owned by Infratil Ltd. and the New Zealand Superannuation Fund, has abandoned plans for a another sale of 7.25% bonds, saying the timing isn’t right to raise more of the debt.

The energy company that acquired the Shell New Zealand assets sold $150 million of August 2015 bonds this month, including $50 million of over-subscriptions and had flagged a second such sale, saying there was plenty of demand from investors.

“After looking carefully at the market, we have decided that the timing is not right for another offer of bonds,” said chief executive Mike Bennetts. It was possible that Z Energy would return to the bond market in the future, he said.

Since the sale of Z Energy’s first sale opened on July 11, figures have shown New Zealand’s economy growing twice the forecast pace while inflation has accelerated, helping drive up swap rates. The seven-year swap rate was recently at 4.88% from 4.81% on July 11. Two-year swaps have surged to 3.73% from 3.35%.

Yesterday, Reserve Bank Governor Alan Bollard indicated he will reverse the 50 basis point cut to the official cash rate imposed after the Christchurch quakes, pushing the OCR back up to 3%. Traders are betting he will lift rates a further 50 points in the next 12 months.

The additional sale of bonds was to have been of September 2019 maturity.

Z Energy’s existing 2016 bonds, which carry a coupon of 7.35%, were last yielding 6.8% on July 22, according to NZX data.

(BusinessDesk)

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