APT Pipelines Limited (“APA”)
Australian Pipeline Limited, in its capacity as trustee and responsible entity of Australian Pipeline Trust.
Medium Term Note Programme dated 12 July 2010
Dated 22 July 2010
7.75% per annum, payable in semi-annually in arrears (in 2 coupons of 3.875%) on 22 January and 22 July in each year including the Maturity Date.
APT must not, and must ensure that each Guarantor does not, create or allow to exist over any of its assets any encumbrance (other than certain permitted encumbrances) securing Financial Indebtedness unless the obligations of the Guarantors and APT with respect to the MTNs are secured equally and rateably with such Financial Indebtedness.
Where Financial Indebtedness means any indebtedness in respect of moneys borrowed or in respect of any financial accommodation.
Early Redemption by Issuer
Yes, for tax reasons
Early Redemption at the option of the Holders
Yes, if there is a Change of Control.
Status and ranking
The MTNs and Guarantee will be direct, unconditional, unsubordinated, irrevocable (in the case of the Guarantors’ obligations under the Guarantee) and unsecured obligations of APT and the Guarantors, respectively, and will rank at least pari passu with all other unsecured and unsubordinated obligations of the Issuer and the Guarantors other than those mandatorily preferred by law.
The value of an investment in APA Bonds may fluctuate due to various factors, including investor perceptions, worldwide economic conditions, interest rates, debt market conditions and factors that may affect APA’s financial performance. The following risks may also affect an investment in APA Bonds:
- Bypass and Competitive Risk – When a new transmission pipeline offers gas transportation service to the same end market serviced by existing pipelines.
- Gas Demand Risk – If the demand for gas weakens, it may reduce the demand for future contracted pipeline capacity and adversely impact APA Group’s future revenue, profits and financial position.
- Operational Risk – APA Group is exposed to a number of operational risks such as equipment failures or breakdowns, rupture of pipelines, information technology systems failures or breakdowns, employee or equipment shortages, contractor default or other unplanned interruptions.
- Contract Renewal Risk – A large part of APA Group’s revenues are the subject of long term revenue contracts with end customers. Due to a range of factors including customer demand risk, gas supply risk, counterparty credit risk, bypass and competitive risk, APA Group may not be successful in recontracting the available pipeline capacity when it comes due for contract renewal.
- Construction and Development Risk – APA Group’s capital expenditure on growth projects is expected to be significant. In certain circumstances, APA Group sets the commercial terms with its customers based on expected capital expenditure costs. Should these costs exceed those estimates used in finalising commercial terms with customers, it may adversely impact APA Group’s future profits and financial position.
The following risks may also affect an investment in APA Bonds:
- Credit Risks associated with the Issuer and any Guarantors;
- Liquidity Risk – An active secondary market in respect of the Bonds may never be established or may be illiquid and this would adversely affect the value at which an investor could sell the Bonds;
- Interest Rate Risks – Bondholders may suffer unforeseen losses due to fluctuations in interest rates;
- Litigation Risks – Risks relating to litigation and regulatory actions;
- Default Risk – If an event of default occurs under the Bonds, or the Issuer fails to perform any obligation in relation to the Bonds, such event or failure may impact on the value of an investment in the Bonds, the transferability of the Bonds and the ability of a holder to recover amounts due under the Bonds. In assessing potential default risk, a bondholder should consider the periodic and continuous disclosures made by the Issuer.
Key benefits include:
- interest paid semi-annually in arrears;
- interest paid as 100% cash;
- interest is not deferrable nor are interest payments discretionary;
- rank equally with all other senior and unsecured creditors of the Issuer.
Events of default
Events of Default include:
- Failure to pay: Applicable, with a cure period of 5 Business Days.
- Other failure: Applicable, with a cure period of 20 days.
- Cross default: Applicable, with a Threshold Amount of A$30,000,000
- Insolvency Event: An Insolvency Event occurs in respect of APT or a Guarantor (and in the case of any such Insolvency Event in relation to a subsidiary of APT, such event has had or is likely to have a Material Adverse Effect);
- Enforcement process: Applicable, with a Threshold Amount of A$30,000,000
- Trust: Variations of the Trust Deed that are likely to have a Material Adverse Effect, including the removal of the Principal Guarantor and variation to the Principal Guarantor’s right of indemnity out of the Trust.
- Nationalisation: All or a substantial part of the assets of APT or a Guarantor are compulsorily acquired by, or by order of, a governmental, or any governmental authority orders the sale or divesting of all or a substantial part of the assets of APT or a Guarantor, and in any case such action has or is reasonably likely to have a Material Adverse Effect;
- Change of control of Issuer: APT ceases to be a subsidiary of the Principal Guarantor; and
- Vitiation (reduction in value or quality): The Deed Poll or the Guarantee ceases to be in full force and effect; or APT or a Guarantor repudiates the Deed Poll or the Guarantee