North Queensland Export Terminal, a unit of Indian conglomerate Adani Group, is eyeing a second private credit loan of up to A$350m (US$230m) to complete the refinancing of the controversial Australian coal-export port.
Private credit funds Alpha Wave Global and Davidson Kempner Capital Management are understood to be potential investors in the latest high-yield loan, along with Farallon Capital Management and King Street Capital Management, which were lenders on a A$450m borrowing completed in April. NQXT, Davidson Kempner and King Street declined to comment. Farallon and Alpha Wave did not immediately respond to questions.
Formerly known as Adani Abbot Point Terminal, NQXT is looking to close the new loan on the same terms as the April deal – a door-to-door tenor of seven years with interest of 9.5% excluding fees of some 65bp–75bp, according to a person involved in the financing.
“We hope to close the second tranche by the first quarter of next year, as we have time until July, but we won't wait until the very end,” the source said.
The first loan in April went towards refinancing debt, leaving NQXT with only a A$329m seven-year bond maturing on June 5 2025 as outstanding debt.
With the closing of the first private credit financing and the likely completion of the follow-on borrowing, NQXT would finally complete a challenging debt refinancing that has been two years in the making, in the face of environmental, legal and political hurdles that made it impossible to access the bond and conventional loan markets.
Opposition to the port has been a focal point of local and global environmentalists, and bank lenders and bond investors, who increasingly avoid coal exposure, have been wary of concerns that the port could damage the Great Barrier Reef. According to a Queensland government report, all Abbot Point anchorages are situated within the Great Barrier Reef Marine Park.
Australia’s Big Four banks and many other global institutions like HSBC and Deutsche Bank ruled out providing financing for the Carmichael project, and big names were absent from NQXT’s proposed Yankee offering in March 2020, which was led by Stifel, Emirates NBD Capital, Haitong and CLSA and failed to find investor demand.
Australia’s buyside has also scaled back its exposure to coal. In early May, the country’s second-largest pension fund Australian Retirement Trust said it would stop investing in most thermal coal companies from July as part of a plan to hit net-zero emissions across its portfolio by 2050, Reuters reported.
NQXT, with a total capacity of 50mtpa, of which approximately 60% is metallurgical coal and 40% thermal, is a deep-water multi-user coal export terminal located 25 km north of Bowen, in North Queensland. Adani acquired a 99-year leasehold from the Queensland government in 2011. The terminal will also export coal from Adani’s flagship Carmichael thermal coal mine development, which is expected to produce 10 million tonnes per year.
In December 2022, NQXT was forced to tap its shareholders – the Adani family and Adani Group – to repay US$500m to bondholders after struggling to raise fresh bonds and loans, including the Yankee offering in March 2020.
Against this backdrop, the 9.5% interest rate on the seven-year private credit financing for NQXT seems cheap.
Last December, Australia's top coal producer Whitehaven Coal successfully closed a five-year credit facility of US$1.1bn with a range of senior financiers, including several non-bank lenders, to fund the acquisition of the Daunia and Blackwater mines. The company had initially marketed a US$900m syndicated financing to bank and institutional investors, releasing price guidance for both sets of lenders.
The opening interest margin for a US$300m three-year revolving credit was guided at 400bp–450bp over SOFR, based on the net leverage ratio of less than 0.5x, while the margin for a US$600m five-year term loan portion was guided at 600bp–650bp over SOFR, and an original issue discount of 98.
The completion of NQXT’s private credit financing in April might assuage rating agencies that have raised doubts over its fundraising abilities.
Last September, Fitch affirmed the BB+ (stable) rating of NQXT’s senior secured debt after taking into consideration its medium-term take-or-pay contracts with port users, and the terminal’s ability to deleverage significantly. However, Fitch said the rating is constrained by uncertainty around the terminal’s long-term capital structure and its ability to access external funding. It expects annual maintenance capex of around A$25m, which will be covered by cashflow from operations.
“The capex is fully funded; the cashflow is high and there is no need to borrow more,” the source involved in the private credit financing said.
Refiled story: Clarifies Davidson Kempner had no comment