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After 30 June 2019 or when the senior leverage ratio (including the previously announced B+I losses) is less than 1.75x for three consecutive months: pricing for one of the three Syndicated Facility Agreement ('SFA') tranches reverts to pricing applicable as at December 2017 and pricing for the other SFA tranches reduces to market pricing (rather than the previous pricing level, which was below market pricing); and pricing for all USPP notes reverts to pricing applicable as at December 2017. At 30 June 2018 there has been no prepayment of any USPP notes, all existing facilities have been maintained and there is no change to the maturity of these facilities. There is also no change to the underlying margin payable on USPP notes, other than the 1.25% additional margin which will cease to be payable no later than 30 June 2019. Bank loans At 30 June 2018 the Group had a $925 million syndicated revolving credit facility on an unsecured, negative pledge and borrowing covenant basis, with ANZ Bank New Zealand Limited, MUFG Bank Limited, Bank of New Zealand, Commonwealth Bank of Australia, Citibank N.A., The Hongkong and Shanghai Banking Corporation Limited, Bank of China (New Zealand) Limited, China Construction Bank (New Zealand) Limited and Westpac New Zealand Limited. The funds under this facility can be borrowed in United States, Australian and New Zealand dollars. At 30 June 2018, the Group was in compliance with the applicable covenants. Private placements The Group has borrowed funds from private investors (primarily US & Japanese based) on an unsecured, negative pledge and borrowing covenant basis. These borrowings comprise A$99 million, US$583 million, C$15 million, EUR41 million, GBP10 million and YEN10,000 million with maturities between 2019 and 2028. At 30 June 2018, the Group was in compliance with the applicable covenants. Other loans At 30 June 2018 the Group had $44 million (June 2017: $1 million) of loans that are secured against specific subsidiaries' own balance sheets or against specific assets and had unsecured loans at 30 June 2018 of $50 million (June 2017: $120 million) some of which were subject to the negative pledge. Other loans include bank overdrafts, short-term loans, working capital facilities, financial leases and amortising loans. Capital notes At 30 June 2018 the Group had issued $416 million capital notes to retail investors (June 2017: $400 million) and $150 million capital notes to institutional investors. The capital notes do not carry voting rights and do not participate in any change in value of the issued shares of Fletcher Building Limited. Listed capital notes Listed capital notes are long-term fixed rate unsecured subordinated debt instruments that are traded on the NZDX. On each election date, the coupon rate and term to the next election date of that series of the capital notes are reset. Holders may then choose either to keep their capital notes on the new terms or to convert the principal amount and any interest into shares of Fletcher Building Limited, at approximately 98 per cent of the current market price. Instead of issuing shares to holders
who choose to convert, Fletcher Building may, at its option, purchase or redeem the capital notes for cash at the principal amount plus any interest. Under the terms of the capital notes, non-payment of interest is not an act of default although unpaid interest is accrued and is interest bearing at the same rate as the principal of the capital notes. Fletcher Building Limited has covenanted not to pay dividends to its shareholders while interest that is due and payable on capital notes has not been paid. The weighted average interest rate on the listed capital notes is 5.43% (30 June 2017: 5.82%). If the principal amount of the listed capital notes held at 30 June 2018 were to be converted to shares, 60 million (June 2017: 50 million) Fletcher Building Limited shares would be issued at the share price as at 30 June 2018, of $6.95 (June 2017: $7.99). As at 30 June 2018, the Group held $84 million (30 June 2017: $100 million) of its own capital notes. Unlisted capital notes On the 6 December 2017 Fletcher Building issued a total of $150 million of unlisted capital notes which are not listed on the NZDX. Fletcher Building can redeem the unlisted capital notes for cash at par after 18 – 30 months depending on the tranche and otherwise in certain defined circumstances. If the notes are not repaid by Fletcher Building, the holder has the right to request conversion of the capital notes into ordinary shares of Fletcher Building Limited at 95 per cent of volume weighted average share price calculated over a period before the time of conversion. If the unlisted capital notes are not redeemed or converted after 18 – 30 months, these rights of redemption and conversion arise on each subsequent quarterly interest payment date. If the principal amount of the unlisted capital notes held at 30 June 2018 were to be converted to shares, 23 million Fletcher Building Limited shares would be issued. Fair value adjustment included in borrowings This is the revaluation of certain borrowings that have been designated in fair value hedge relationships for changes in benchmark interest rates. Credit rating The Group has not sought and does not hold a credit rating from an accredited rating agency. Negative pledge The Group borrows certain funds based on a negative pledge arrangement. The negative pledge includes a cross guarantee between a number of wholly owned subsidiaries and ensures that external senior indebtedness ranks equally in all respects and includes the covenant that security can be given only in very limited circumstances. At 30 June 2018 the Group had debt subject to the negative pledge of $1,253 million (June 2017: $1,650 million).
77 Fletcher Building Limited Annual Report 2018
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