Yancoal bankrolled amid tough times

YANCOAL Australia’s founding shareholder Yanzhou Coal Mining has agreed to invest up to an additional $US3.2 billion ($A3.7 billion) into the Australian coal producer with $1.8 billion to come from a new Yancoal capital raising.
Yancoal bankrolled amid tough times Yancoal bankrolled amid tough times Yancoal bankrolled amid tough times Yancoal bankrolled amid tough times Yancoal bankrolled amid tough times

Yancoal's Stratford operation is located 95km north of Newcastle in the Gloucester Basin. Courtesy of Yancoal.

Blair Price

The $2.3 billion-target raising consists of offering 2.32112 subordinated capital notes for every 1000 Yancoal shares held.

Yancoal said the SCNs will have a face value of $100 each with their holders to initially receive a 7% per annum distribution rate to be paid semi-annually with the first payment in June 2015.

While China’s Yanzhou has agreed to take up 78.3% of the SCNs, it has separately committed to providing up to $1.4 billion more via a 10-year loan facility.

In another boost to Yancoal’s financing front, it said Bank of China and China Construction Bank both committed to extending Yancoal’s repayment of their $2.6 billion facility by three years – making Yancoal’s first repayment not due until June 2020.

Lastly, Yanzhou has further agreed to ensure Yancoal continues to operate and remain solvent for as long as Yanzhou owns 51% of the coal company. Yancoal said Yanzhou could revoke this commitment but only by “giving not less than 24 months’ notice.

Yancoal has agreed to use the $1.8 billion of the Yanzhou-related SCN proceeds to repay this much of the senior loan debt from Yanzhou.

It said remaining proceeds will be used to part fund Yancoal’s existing coal operations and further growth projects – including the underground stage 2 expansion of the Moolarben thermal coal mine in New South Wales.

Yancoal CEO Reinhold Schmidt said the company’s existing level of debt was a constraint on its future expansion and operational improvement strategies.

“Yanzhou’s support for the offer and associated additional funding commitment, demonstrate its continued long term investment in Australia, and provides greater certainty for our more than 2000 employees and the communities in which we operate,” he said.

He also said Yancoal continues to take the necessary steps to reduce gearing, improve operational efficiencies and deliver cost savings to “weather the challenges of an increasingly competitive marketplace”

The funding and SCN proposals require shareholder and regulatory approvals with Yancoal flagging that the SCNs could be issued before December 31.

Deutsche Bank is managing the SCN offer which is not underwritten.

Yancoal, known as Felix Resources before Yanzhou acquired it in 2010, operates seven mines in Australia.

As part of the takeover conditions, Yanzhou floated Yancoal in mid-2012 and owns 78% of the company.

Shares in Yancoal slumped by more than 20% to A17.5c.

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