(Corrects in paragraph 11 to show that Pact Group is controlledby Raphael Geminder; it is not owned by New Zealand tycoonGraham Hart)
SYDNEY, May 22 (Reuters) - Private equity-controlled powerfirm Alinta Energy is planning a $1 billion-plus debt issue inthe U.S. term loan B (TLB)institutional market to refinancematuring debt, banking sources familiar with the deal said,joining a growing number of Australian borrowers attracted bythe terms and pricing available.
Alinta, controlled by U.S. buyout giant TPG Capital, is carrying A$1.2 billion ($1.17 billion) in seniorterm loans, an A$400 million super senior loan, as well asinterest rate swaps of around A$210 million on amarked-to-market basis, according to the sources.
The sources declined to be identified because of thesensitive nature of the deal. Alinta's spokeswoman declined tocomment.
The emergence of the TLB market is causing grief to loanbankers already grappling with low credit growth in Australia.
"Every domestic Australian bank should be worried aboutleakage to this market. It is business we are missing out on,"said John Corrin, Australia & New Zealand Banking Group's global head of loan syndications.
U.S. TLB issuance has skyrocketed, driven by a combinationof increased money supply and investors' drive for yield. Totalvolume year-to-date hit $282 billion, up 57 percent compared tothe same period last year according to UBS.
Issuance by Australasian borrowers this year hit $3.74billion, more than double the $1.48 billion of leveraged loansdone in Australia according to Loan Pricing Corp data.
(For a graphic, click http://link.reuters.com/zuf38t)
ATTRACTIVE TERMS
The TLB market offers attractive pricing over longer tenorscompared to the Australian bank loan market. Currently borrowerscan refinance seven-year debt in the TLB market for 300 basispoints over Libor, compared with typical three-year leverageloan refinancing starting at 350 basis points over BBSY -Australia's bank bill bid swap rate.
The term loan B market is similar to the sub-investmentgrade or "junk" bond market in that it offers riskier borrowerslong-term funding.
"It maybe attractive for companies going through restructureor a growth change programme to lock in funding on set termswhich can take the business through challenging times," saidChris Champion, head of leverage finance at Goldman Sachs in Australia.
Cinema operator Hoyts, owned by Australia's Pacific EquityPartners, and packaging firm Pact Group, controlled by RaphaelGeminder, have this week successfully priced debut issues aftercutting the margin.
"Market conditions in the U.S. are very strong at themoment, and certain issuers can achieve more aggressivepricing," said Andrew Ashman, director Asia-Pacific loansyndicate at Barclays in Singapore.
The foreign exchange risk is key for borrowers who do nothave U.S. dollar revenues to hedge the debt repayment.
"The market is a legitimate alternative for Australianissuers, but you need to be aware of the cost involved inbreaking the foreign exchange swaps for operational or companyreasons," said Alistair Dick, head of debt advisory andrestructuring, Rothschild Australia. ($1 = 1.0233 Australian dollars) (Reporting by Sharon Klyne; Editing by Eric Meijer)
Barclays (BARC)