Sydney, December 08, 2011 -- Moody's Investors Service says that Australian infrastructure issuers
face increased refinancing challenges in 2012-2013, but the
exercise should be manageable overall.
Australia's rated infrastructure issuers will need to raise approximately
AUD9 billion to refinance debt maturing in the next two calendar years.
In addition, they will need AUD6-7 billion of incremental
debt to finance growth.
"We believe the funding requirements of the sector will be manageable,
assuming the ongoing functioning of financial markets", says Terry
Fanous, a Moody's Associate Managing Director.
"The Australian rated infrastructure sector is dominated by investment
grade rated issuers, which have strong competitive profiles,
low business risk, and stable earnings. The refinancing amount
is also manageable when compared to last year's task, and to other
Australian sectors, such as banks and non-financial corporates",
Fanous adds.
Fanous was speaking on the release of a new Moody's report on the
sector's refinancing needs in 2012 and 2013.
Deleveraging initiatives in recent years by many of the rated infrastructure
issuers have placed them in a better position to manage their refinancing
and capital investment requirements than during global financial crisis.
Many issuers also have in place committed available facilities to assist
in managing the refinancing task.
"But the European sovereign debt crisis exposes Australian issuers to
the risk of eroding investor credit appetite, particularly in offshore
markets", Fanous says, adding, "The ongoing uncertainty
in credit markets is a key issue facing the sector's funding task".
Moreover, we expect the elevated credit margin environment to remain
a feature in the sector's refinancing initiatives", Fanous says.
Issuers that have solid investment grade ratings, and maintain appropriate
capital structures to deal with the inevitable increase in credit margins
will be better positioned.
At the same time, the report notes the sector's drive for funding
diversity. "The infrastructure sector continues to tap different
capital markets as part of issuers' plans to diversify funding sources",
Fanous says, adding, "Achieving greater funding diversity
is a credit positive, but the need to execute refinancing plans
well ahead of time cannot be overstated".
Despite the sector's drive for funding diversity, the Australian
bank market remains an important source of debt. "Over time,
we expect some banks, particularly those in Europe, to gradually
become more selective in their lending as a result of increased capital
requirements due to the implementation of the Basel III framework",
Fanous says.
"It is still early to say how the application of Basel III will specifically
impact banks' lending practices and credit allocations. It
is likely that European banks will more aggressively manage their exposures
to the sector, given these issues and challenges in their home markets,
but at the same time, we are seeing a gradual increase in Asian
bank lending to this sector", Fanous adds.
Over the medium-to-long term, a number of rated Australian
PPPs are exposed to disproportionately higher refinancing risk given their
highly leveraged structures. Without changes to their capital structures,
these PPPs may not be able to support (at current rating levels) elevated
credit margins when they need to refinance debt from 2014 onwards.
The report is entitled, Australian Infrastructure Issuers' Refinancing
Task for 2012-2013: Manageable, but Growing Challenges.
It can be found at www.moodys.com
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Terry Fanous
Managing Director
Infrastructure Finance Group
Moody's Investors Service Pty. Ltd.
Level 10
1 O'Connell Street
Sydney NSW 2000
Australia
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Spencer Ng
Asst Vice President - Analyst
Infrastructure Finance Group
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Moody's: Refinancing for Australia infrastructure issuers manageable, but challenges growing