Amcor releases US$ 89 million in Australian property assets

In July this year, Global packaging group Amcor Ltd released nearly $US 89.69 million through the sale and leaseback of some properties in its Australian portfolio, paving the way for further investme…

In July this year, Global packaging group Amcor Ltd released nearly $US 89.69 million through the sale and leaseback of some properties in its Australian portfolio, paving the way for further investments. Amcor expects to complete the US$ 89.43 million securitization program by early August. The sale and leaseback of the properties will see the group reduce its exposure to property assets, allowing it to improve its return on capital and plough the proceeds into higher yielding investments. “This is another important step in optimising returns for our shareholders,” Amcor managing director Russell Jones said in a statement today. “This securitization program enables us to utilize a cost effective funding structure and invest the proceeds to improve shareholder returns. “Amcor targets a return of 15% profit before interest and tax to average funds employed, which is higher than that required by investors in land and buildings.” According to analysts, the transaction was small overall for Amcor but was nonetheless a positive move. Adding these new funds to the part proceeds still to come from the sale of its stake in Kimberly-Clark Australia, Amcor would have about US$ 512.5 million, “if not more”, to spend on acquisitions. “It frees up more financing for them to proceed with their overseas expansion strategy,” another analyst said. Mr Jones confirmed Amcor would continue to look at opportunities to grow in its chosen market segments. “While the funds will initially used to repay debt, ultimately they will be invested in new projects and acquisitions,” he said. Amcor was aiming to become one of the top five global packaging companies, acquiring both the Flexibles Europe and the US CNC Containers businesses this year. International ratings agency Standards & Poor“s (S&P) said 17 of Amcor“s industrial properties would be securitized via a property investment trust funding through a combination of US$ 39.82 million sourced from bank securities and a US$ 53.66 million commercial mortgage-backed security (CMBS) issue. S&P assigned preliminary `BBB plus“ ratings to the US$ 26.39 million tranche 1 and the US$ 13.41 tranche 2 credit lease-backed notes and a preliminary `BBB plus“ rating to the US$ 53.66 million tranche 3 CMBS-backed notes. The programme would have no impact on Amcor“s current ratings or outlook. S&P has a corporate credit rating to Amcor of BBB plus/Stable/A minus2. “When completed the securitization will provide further diversification of loan mix and provide Amcor Ltd with enhanced financial flexibility through the extension of its debt maturity profile to 2.6 years from 2.3 years,” the ratings agency said. “After adjusting for operating leases, the company“s net debt-to-net capital ratio should reduce by about 1% to below 50% … following the completion of the transaction.”