As at 30 June 2009
At 30 June 2009, PaperlinX had net debt of $217 million (prior year $776 million), represented by interest bearing liabilities of $586 million (prior year $1,017 million) and cash assets of $369 million (prior year $241 million).
In December 2008, PaperlinX announced that it was in breach of its Syndicated Multi-Currency debt facility and USPP Notes facility loan covenants and as a consequence had commenced discussions with both groups of lenders to obtain waivers for these breaches. Permanent waivers for loan covenant breaches for the periods ending 31 December 2008, 31 March 2009 and 30 June 2009 were achieved. On 31 August 2009, PaperlinX announced that it had renegotiated the tenure of its two main debt facilities subject to meeting certain loan covenant tests. The Syndicated Multi-Currency facility now expires in February 2011 and the USPP Notes facility expires in 2014/15. The new loan covenant test for the 2010 financial year includes minimum levels of earnings and net worth. Covenants for the period beyond July 2010 have to be agreed with both lenders by December 2009.
Proceeds received in June 2009 from the divestment of the Australian Paper division were used to partially pay down the Syndicated Multi-Currency debt facility and USPP Notes facility.
PaperlinX’s policy on interest rate management is to monitor and, where appropriate, hedge the Company’s exposure to movements in interest via a combination of interest rate swaps and fixed rate issuances.
Offshore debt is managed to minimise the translation impact on the Company’s Australian balance sheet while aiming to optimise the returns to the Company.
PaperlinX actively reviews funding options with the aim of achieving the lowest possible cost of funds.
During September and October 2008, PaperlinX successfully completed an institutional and retail accelerated non-renounceable entitlement offer. In total, $177 million (net of costs) was raised from these offers. Proceeds from these offers were used to pay down interest bearing debt.
As a result of the loan covenants breaches announced in December 2008, PaperlinX did not pay an ordinary interim or final dividend this year. Future dividend payments are subject to approval by the Company’s lenders. In addition, the 30 June 2009 PaperlinX Step-up Preference Securities distribution was also not paid. As with ordinary dividends, future distributions for these securities are subject to lender approval.
Cash Flow and Working Capital
For the year ending 30 June 2009, PaperlinX had net operating cash flows of $(6) million. This result reflects the difficult trading environment that the Company experienced during the year. In particular, the first six months of the financial year saw significant volume reductions throughout the global paper industry.
Total capital expenditure for the year was $180 million. This was significantly lower than the prior year ($326 million) due to the Maryvale pulp mill project completing in December 2008.