Origin Energy locks in $1.16 billion in debt

Origin Energy (ASX: ORG) has announced that it has successfully priced €800 million medium term notes as part of its refinancing of existing debt facilities. The notes have an eight-year term with a coupon of 3.5% and mature in October 2021. The integrated energy company also announced that the proceeds had been swapped into Australian dollars, providing the company with A$1.16 billion.

The market has previously held reservations regarding Origin’s ability to fund its share of the massive Australia Pacific LNG Project (APLNG). The company recently announced a $7.4 billion syndicated loan facility, which this latest note issue will partially repay. These two recent financing developments should help the market become more comfortable with Origin’s ability to finance APLNG without the need to undertake a dilutive, capital raising.

Origin’s debt raising comes just days after BHP Billiton (ASX: BHP) announced it had priced a US$5 billion bond issue. The issue was priced in four tranches with US$500 million in Senior Floating Rate Notes due 2016 at 25 basis points above LIBOR, $500 million in Senior Notes due 2018 at 2.05%, US$1.5 billion in Senior Notes due 2023 at 3.85% and US$2.5 billion in Senior Notes due 2043 at 5%.

The debt will be used for general corporate purposes and will no doubt please shareholders to see the company making use of the low interest rates on offer to lock in long-term funding requirements.

Foolish takeaway

With low interest rates available both domestically and overseas, companies should be looking to lock in their long-term funding needs, as debt financing is nearly always cheaper than equity financing. The fact that large Australian corporations can currently raise debt on terms similar to or even better than the government highlights this opportunity.

Interest rates are low, which is great it you’re borrowing money but not great if you need income! Discover The Motley Fool’s favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of “The Motley Fool’s Top Dividend Stock for 2013-2014.”

More reading

Motley Fool contributor Tim McArthur owns shares in Origin Energy.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.