Axium Infrastructure and Manulife Financial Corp issued a C$1.08 billion dual-tranche private placement in March 2019 to finance their C$1.39 billion joint acquisition of a 55% stake in the 277 MW Northwestern Hydro portfolio of run-of-river hydro facilities from AltaGas Canada, building on a similar deal the previous year for 35% of the shares.
Following Tahltan Central Council's purchase of a 5% share in July 2019, Axium and Manulife now own an 85% stake in the portfolio, which has 60-year fully indexed power purchase agreements with triple-A-rated BC Hydro.
The remaining 10% of the portfolio is held by TriSummit Utilities (formerly AltaGas Canada).
RBC Capital Markets was the placement agent on the private placement, having also provided a bridge loan to support the acquisition. The transaction was split between a C$546 million ($408 million) 18-year and a C$538 million ($402 million) 20-year note, both with bullet repayment structures, giving the sponsors a 78% leverage ratio.
Both tranches were rated A (low) by DBRS and priced at about 180 basis points over Canadian government bonds.
The debt package features an escalating DSCR profile, which progressively increases to 2.10x under rating-case assumptions and provides a strong cushion against both low water-flow years like 2018 and increased uncertainty toward the debt tail in 2034.
At just five years old, the three-asset fleet is relatively new in hydro terms. The portfolio comprises the 195 MW Forrest Kerr, 66 MW McLymont Creek and 16 MW Volcano Creek facilities, located on the Iskut River in the Tahltan First Nation, approximately 620 miles northwest of Vancouver.
Seller: AltaGas Canada (now TriSummit Utilities)
Buyers/sponsors: Axium Infrastructure, Manulife Financial Corp
Total value: C$1.39 billion
Total debt: $1.084 billion
Closing date: March 13, 2019
Placement agent: RBC Capital Markets
Sell-side financial advisers: TD Securities, JP Morgan
Issuer’s counsel: Davies
Investors’ counsel: McCarthy Tétrault
Rating agency: DBRS Morningstar
Independent engineer: WSP
Insurance consultant: Moore-McNeill
Model auditor: BDO
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