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Downer offers high return for infrastructure exposure

by Gavin Madson | May 30, 2013

Downer Group’s latest fixed rate bond offers investors the opportunity to boost their fixed income returns via an investment grade issuer.

The fixed rate issue from Downer Group Finance Pty Limited (Downer) has a maturity of 29 November 2018 and is currently offering a yield to maturity of 5.60%. Downer is one of Australia’s largest engineering services firms with a market capitalisation of around $1.6bn and $4.7bn in revenues for the first half of FY13.

Underwriting the company going forward is its $18.9bn work-in-hand order book which is diversified across its three main markets; mining, infrastructure and rail. The forward contracted fees include a mix of contract types with 42% contracted under schedule of rates, which limits contracting price risk for the company. Contracts also include a number of long term full life service contract such as the 30 year maintenance contract for NSW’s Waratah trains

With net debt of $422.9m, total assets of $4,050.2m and cash and available facilities of $841.7m the company’s balance sheet and liquidity positions remain strong. The group has also undertaken $292.1m in new financings in the past year displaying the continued support of the investment community for the company.

The Downer 2018 bonds are only available to wholesale investors and can be purchased in minimum parcels of $50,000.

All prices and yields are a guide only and subject to market availability. FIIG does not make a market in these securities