Bluefield Solar wants to use long term debt

Bluefield Solar is seeking approval from shareholders for an amendment to the company’s investment policy which would, if approved, enable it to incur long term structural debt at the holding company level. The existing investment policy envisages that Bluefield Solar will only use short term debt at the holding company level. Shareholders should note that the proposed amendment will not increase the overall limit on borrowings set out in the existing investment policy and in all cases the combined short term and long term leverage will not exceed 50 per cent. of the company’s gross asset value at the time of drawdown.

As explained in the Placing Programme Prospectus published by the company on the 26 October 2015, the Investment Adviser was exploring a large number of both primary and secondary project opportunities, the acquisitions of a number of which were completed utilising the amended and restated Acquisition Facility, upon which it intends to enter into exclusivity arrangements, subject to securing availability of sufficient funding. To realise the acquisition of the pipeline assets, the Company intends to utilise the Acquisition Facility as a short term financing measure, with the intention that it would be replaced by long term structural debt (subject to shareholders’ approval), as well as further equity, with a target long term leverage of 25-35 per cent. of gross asset value. In all cases, the combined short term and long term leverage of the group and the SPVs in which it invests will not exceed 50 per cent. of gross asset value at the time of drawdown (this being the limit on aggregate group debt set out in the company’s existing investment policy).

• The Directors believe, as advised by the Investment Adviser, that the introduction of long term structural debt at holding company level, in conjunction with an acquisition facility, will have the following benefits:
• the Company may, in combination with the targeted long term structural leverage of 25 to 30 per cent. of GAV (which will not exceed 50 per. cent. of GAV), achieve, overall, a more favourable debt package, with particular reference to the interest rate and covenants on the long term debt;
• these favourable terms, in respect of the long term debt, may be locked in over a longer period thereby providing a better match of the debt servicing costs with the cashflows from, and life of, the underlying assets;
• by having a significant element of the overall gearing of the Group provided through long term debt, any refinancing risk associated with an acquisition facility will be reduced;
• reducing the amount of debt at SPV level relative to overall debt may reduce the risk that any cashflow will be locked at SPV level, with a corresponding reduction of risk to the Group’s revenue and dividend targets; and
• the use of long term structural debt at the holding company level will provide greater transparency to shareholders as to the capital structure of the Company and the cost of debt that it has incurred.

Shareholders should note, however, that it may not be possible to refinance any long term debt either: (i) during the duration of the debt should better terms become available in the market; or (ii) on maturity of the debt when the balance of any debt outstanding will become repayable. In addition, any long term debt will be secured over the Company’s portfolio as a whole rather than over any specific asset within the portfolio (on a basis that limits the recourse to other assets within the portfolio).

Together with The Royal Bank of Scotland plc and Investec Bank plc, the “Long Term Debt Advisers” to the HoldCo, the Investment Adviser has commenced, as requested by the Board, the work required in order to introduce long term structural debt. As at the date of this announcement, this work has progressed well.  The Long Term Debt Advisers issued an indicative teaser to potential lenders, following from which indications were received from multiple leading debt providers in both the size required and at the coupon rates prevailing in the infrastructure sector for debt of this nature.  Together with the Long Term Debt Advisers, the Investment Adviser has identified and recommended a short list of potential lenders with whom a formal due diligence and bidding process has been initiated.  That process is anticipated to progress substantially over the next few months.

The proposed amendment of the investment policy set out at the end of this announcement has been approved in principle by the FCA in accordance with the Listing Rules.

The Proposal is conditional on the approval by Shareholders of the Resolution to be put to Shareholders at the Extraordinary General Meeting, which has been convened for 1 July 2016 at 10:00 a.m.

BSIF : Bluefield Solar wants to use long term debt