€500m funding for Bord Gáis

FUNDING of €500 million raised by Bord Gáis will ensure the company maintains a “robust financial position”, according to senior executives.

However, the company said that a further downgrading of its credit rating would have an impact on future borrowings.

The credit rating of Bord Gáis was reduced to just above junk status by Moody’s recently.

The company said each credit rating notch downgrade costs its around €3.75m a year in additional interest charges.

The latest funding will be used to strengthen the liquidity of the company but the company has no immediate plans to draw down this facility saying its availability is an asset.

The state-owned energy company paid a “modest premium” for its latest finance relative to its European peers due in the most part to the economic position of the Irish sovereign.

It declined to specify the funding cost, but said it was “substantially” below the 650 basis point spread over German five-year bonds charged for Irish sovereign debt when the deal was agreed in June.

It has raised the €500m from a number of international banks, including Royal Bank of Scotland, AIB Corporate Banking, Barclays Bank, BNP Paribas, Danske Bank, HSBC, Royal Bank of Canada and Ulster Bank.

The company said the funding round, which was oversubscribed, represents a “significant vote of confidence” by international bank lenders in the financial strength and strategic direction of the company.

The funding takes the form of a multi-currency revolving credit facility. Bord Gáis initially approached the loan market for €400m but said strong participation from international banks meant the funding was oversubscribed and the company decided to cap the financing at €500m.

Chief financial officer at Bord Gáis Michael O’Sullivan said they are very pleased with the success of this round of financing: “This deal, with such a strong and geographically diverse range of international banks demonstrates investor confidence in Bord Gáis’ business strategy and financial strength. The pricing and timing of this refinancing have worked well for Bord Gáis. We paid a modest premium for this finance, relative to our European peers, due in the most part to the economic position of the Irish sovereign. However, since this deal concluded, the prevailing market has deteriorated and what was a good deal in June – when we put in place a facility at credit spreads substantially inside those which would currently apply to the sovereign – looks even better in today’s market,” he said.

Mr O’Sullivan said the decision to refinance in quarter two 2011 was “prudent” as there was greater stability in the syndicated loan market during this period.