Vector offers bonds for UNL buy, eyes float

4.00pm

Vector launched a capital bond issue of up to $350 million today to help it buy fellow electricity lines company UnitedNetworks.

Community-owned Vector also said it was planning to float just under quarter of the company on the New Zealand Stock Exchange within a year.

"This is the first opportunity for the public to invest with Vector and it is centred on a transaction which will bring together under one ownership the two largest energy distribution businesses in New Zealand," Vector Chairman Michael Stiassny said.

If the purchase is completed, Auckland-based Vector will distribute electricity to about 615,000 customers -- more than one-third of the New Zealand market.

Investors in the bonds would also be entitled to an allocation of ordinary shares in the event of the IPO, the company said.

The proposal was that by the end of September next year, 24.9 per cent of the shares would be floated on the NZSE, with current owners, the Auckland Electricity Consumers Trust holding 75.1 per cent, the offer document said.

"However, no absolute assurance can be given that the equity raising and quotation will proceed, and any final decision to proceed will be made by the board at a future date," Stiassny said.

ABN AMRO Rothschild has underwritten $300 million of the bond offer and director John Moore said interest from brokers and institutions in the pre-marketing process had been strong.

"On this basis, nearly all of the $300 million which we underwrote has been allocated firm to a large number of retail brokers and institutions," he said.

The offer will open October 1 and the bonds will carry a minimum annual interest rate of 8.25 per cent, the company said.

Vector has said its net cost for the purchase of UnitedNetworks at $9.90 a share was around $1.8 billion.

The total includes around $1.25 billion in debt, but planned asset sales to energy distribution companies Powerco and Hawke's Bay Network are set to bring in $1 billion.

Standard & Poor's downgraded unlisted Vector's credit rating by five notches to BBB-plus from its previous investment grade rating because of the increased debt required to fund the purchase.

Shares in UnitedNetworks', whose majority shareholder U.S.-based utility Aquila Inc ILA.N has agreed to sell its stake, last traded unchanged at $9.82 in a slightly weaker overall market.

- REUTERS

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