Refinancing deal 8.5% accretive to FY22e

EHL has announced that it will issue A$250m of Senior Secured notes to refinance its existing US denominated debt. The notes will have a have a fixed coupon rate of 6.25% versus the current effective hedged rate of 9.86%, resulting in ~$9.0m per annum of interest savings (8.5% accretive to FY22e Underlying EPS) and extending the debt maturity to Jul’26 (previously Mar’24).

We expect the actual payback to be ~2 years after accounting for the issuance fees (BPe $5m), repayment premium of 4.625% (~$11m) and costs related to closing hedging positions early (BPe ~$4m).

Surge in coal prices presents upside

EHL has reiterated its guidance for FY21e Operating EBITDA to be between $235- 238m (BPe $237.9m), although we believe coal prices should see EHL go top of range. Prices of metallurgical and thermal coal have increased by +62.3% and +37.1% respectively since the guidance was first provided on the 23rd April, incentivising increased operating utilisation of the eastern fleet (60% of 1H21 Operating EBITDA).

Sustained elevation of coal prices would likely speed up redeployments of latent equipment on the east coast (BPe ~$15-20m of annualised Operating EDITDA) and increase operating utilisation, presenting upside to FY22e consensus estimates.

To read the full report click the read more button below.

View Detailed Report
Authored by Hamish Murray – Analyst – at Bell Potter Securities, 24 June 2021
Important Disclaimer—This may affect your legal rights: Because this document has been prepared without consideration of any specific client’s financial situation, particular needs and investment objectives, a Bell Potter Securities Limited investment adviser (or the financial services licensee, or the proper authority of such licensee, who has provided you with this report by arrangement with Bell Potter Securities Limited) should be consulted before any investment decision is made. While this document is based on the information from sources which are considered reliable, Bell Potter Securities Limited, its directors, employees and consultants do not represent, warrant or guarantee, expressly or impliedly, that the information contained in this document is complete or accurate. Nor does Bell Potter Securities Limited accept any responsibility to inform you of any matter that subsequently comes to its notice, which may affect any of the information contained in this document. This document is a private communication to clients and is not intended for public circulation or for the use of any third party, without the prior approval of Bell Potter Securities Limited. In the USA and the UK this research is only for institutional investors. It is not for release, publication or distribution in whole or in part to any persons in the two specified countries. This is general investment advice only and does not constitute advice to any person.
Disclosure of Interest: Bell Potter Securities Limited receives commission from dealing in securities and its authorised representatives, or introducers of business, may directly share in this commission. Bell Potter Securities and its associates may hold shares in the companies recommended.