NBN Co sources $6.1 billion from banks

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NBN Co sources $6.1 billion from banks

Bolsters working capital, upgrades possible.

NBN Co has secured access to a total of $6.1 billion from Australian and international banks, well above the $2 billion it had initially sought.

Finance Minister Mathias Cormann said the credit facilities “demonstrated … strong support in the market for the NBN business plan and outlook.”

He said the additional $4.1 billion - on top of the initial $2 billion NBN Co said it would need back in mid-2018 - had been secured “at very competitive prices" and via "arrangements with a number of Australian and international banks".

“There is no requirement for NBN Co to draw down on these additional facilities immediately, but the Government agrees with the company that it makes sense to have these facilities in place, to give it flexibility and given current economic conditions,” Cormann said in a statement.

Of the $6.1 billion, NBN Co “is expected to draw down $2 billion”, given those funds were needed to cover increased build costs caused by past delays to the HFC rollout and fixed wireless congestion remediation.

“The additional funding will provide the company opportunities to invest and create even more value for Australians guided by future corporate plans,” Communications Minister Paul Fletcher said.

From the additional $4.1 billion debt facilities, $1.5 billion “will be reserved for working capital to provide the company with added flexibility and to support NBN Co’s long term capital management strategy,” the Government said

Some of that money could be used by NBN Co to "pay down" an existing $19.5 billion loan from the Government "without jeopardising [NBN Co's] performance".

“The balance of funds is available for strategic investments with a positive return beyond the initial rollout phase and repayment of the Commonwealth loan, subject to shareholder approval.”

NBN Co's requirement for additional private funding may also stem from revenue downgrades through the FY22.

The company's FY19 revenue was $200 million less than forecast, while it also downgraded expected revenue for FY20 by $200 million and FY21 by $300 million.

It was also recently revealed that NBN Co is estimated to have a fair value - or saleable value - of just $8.7 billion at the end of June 2019, a bit less than one-third of the equity the government put into it.

NBN Co's CFO Philip Knox said in a statement that the agreements "represent an important next step for us as we approach the completion of the rollout."

He also said that "the pricing of the new facilities is in line with debt pricing for high investment grade Australian corporate borrowers."

“The financing ensures NBN Co has adequate liquidity and supports our long-term financing strategy of diversifying our funding sources," he said.

An NBN Co spokesperson was contacted for comment.

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