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Challenger strengthens balance sheet

The Australian infrastructure fund plans to use the £168m it has just received from the sale of a UK water company to reinforce its capital position and deleverage over the next two years.

Australia’s Challenger Infrastructure Fund announced today that it has received £168 million (€188 million; €274 million) in proceeds from the sale of UK water company Southern Water.

Challenger: cuts
A$122m in debt

Challenger said it will use the money over the next 12 to 24 months to strengthen its balance sheet. As such, the fund intends to deleverage by paying off A$122 million (€77 million; $113 million) in redeemable preference securities in addition to buying back up to 10 percent of its ordinary shares.

The Australian listed fund announced the sale of its remaining 15.6 percent stake in Southern Water last November.  The £168 million price tag represents a premium of 1.26x the utility’s regulated capital value and is equivalent to its net asset value at the end of June 2009. Challenger was part of the original consortium that acquired the entirety of Southern Water in October 2007.  At this time, the fund paid £300 million for a 27 percent equity stake in the utility, which it has been progressively selling off.

Following the transaction, Challenger now owns controlling stakes in two assets – an 80.4 percent interest in independent gas transporter Inexus and a 66.2 percent stake in storage terminal operator LBC Terminals.