MightyRiverPower's proposed issue of up to $300 million of July 2044 bonds has been rated BB+ and assessed as 'intermediate equity' by Standard & Poor's, meaning the ratings company will classify 50 percent of the interest paid as dividends.
The rating and classification come after S&P last year changed its criteria for assessing the equity content of hybrid instruments such as MightyRiverPower's subordinated capital bonds, which can be redeemed early and have interest payments deferred at the power company's discretion, and are subject to having their terms reset on July 11, 2019, and every five years thereafter.
The company's own credit rating is BBB+ and the rating on the bonds, which is below investment grade, reflects their subordination and interest deferred features, chair Joan Withers said in the prospectus.
The minimum interest rate for the first five years will be set via a bookbuild and is expected to be in a range of 6.8 percent to 7 percent. Funds raised will be used for general corporate purposes, repayment of bank debt and to extend the average term of the company's funding, it said. The offer will include a public pool, giving preference to existing shareholders in the event of scaling, MightyRiverPower said.
The company "believes that hybrid securities that are ascribed equity content such as the capital bonds are an effective capital management tool and intends to maintain such instruments as a key feature of its capital structure going forward," it said.
Forsyth Barr, ANZ New Zealand, Deutsche Craigs and Goldman Sachs are managing the sale. The offer opens on June 18 and closes July 8. The bonds are expected to be quoted on the NZX Debt Market from July 11.
The shares last traded unchanged at $2.26 and have gained 6.1 percent this year.