By Ross Kelly
SYDNEY--Caltex Australia Ltd. (CTX.AU) said Tuesday it will
raise A$300 million from a hybrid note issue and shrink the
proportion of profit it pays in dividends to help fund the closure
of its Kurnell oil refinery in Sydney.
The move comes after Standard & Poor's last week put the
company's credit rating on review for a possible downgrade in the
light of expenses associated with the closure.
Caltex, 50%-owned by Chevron Corp. (CVX), said the 20-year notes
will have a maturity date of 2037 and are expected to pay the
three-month bank bill rate plus a margin of between 4.50% and
4.75%, with the level to be finalized after a bookbuild. That
equates to an initial yield of between 8.0% and 8.25%,
approximately.
Sydney-based Caltex, which intends to keep operating its other
Australian refinery, Lytton in Brisbane, said last week that it
expected to make provisions in 2012 of about A$450 million for
Kurnell to cover employment benefits, dismantling and remediation
expenses.
It will also invest about A$250 million converting the Kurnell
operation into a fuel-import terminal.
The company's dividend payout ratio has been cut to 20-40% of
replacement-cost-of-sales operating profit, down from 40-60%. It
intends to revert back to the old ratio after Kurnell's closure in
2014.
Australia's ageing refineries are small compared with new
facilities being built in China and India, making it tough for
local operators to compete on costs. Royal Dutch Shell PLC (RDSB)
is due to close its Clyde refinery in Sydney next month.
-Write to Ross Kelly at ross.kelly@wsj.com
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