Caltex aims to raise $300m

Caltex Australia says it is confident of getting investor support for its $300 million capital raising despite a ratings agency casting doubt on its balance sheet.

The fuel supplier plans to raise the money through hybrid or subordinated notes - a combination of equity and debt - to help fund its operations and major supply chain changes announced last week.

That includes converting its loss-making Sydney oil refinery into a fuel import terminal, which will cost an estimated $680 million and mean the loss of hundreds of jobs.

Standard & Poor's (S&P) put the company's credit ratings on a negative watch the next day, citing the significant funding requirements for the conversion and new investment needed in marketing.

Caltex's chief financial officer Simon Hepworth said it was up to S&P whether it took the company off `negative watch' but Caltex was committed to its current BBB+ credit rating.

He told reporters on Tuesday he expected the launch of the hybrid together with a reduction in Caltex's (dividend) pay-out ratio would be supportive of the credit rating.

"S&P clearly don't like the volatility in the refining business ... they see increased risk from the transition period and investment in the new terminal," he said.

"Our view is those cashflows over the transition are largely self funding, cash inflow benefits will offset outflows."

The subordinated notes - a combination of equity and debt characteristics - will be priced at $100 each with 4.5-4.75 per cent interest rate returns and 8-8.25 per cent annual yields, Caltex said.

The company said it anticipated strong interest from retail and institutional investors.

Mr Hepworth compared it to Woolworths' successful $700 million hybrid issue last year.

The money Caltex raises - which it said may exceed $300 million - would be used to pay down debt, with net debt of $617 million at the end of 2011.

It would provide fiscal headroom for the conversion at Sydney's Kurnell refinery, fund growth and investment in infrastructure such as possible terminals at Port Hedland, Mackay and Gladstone, new fuel retail stores, merger and acquisition activity and truck stops, the company said.

The first call or redemptions of notes were not until 2017, when the new import terminal will have been built.

Its shares closed one cent higher at $14.13 on Tuesday.

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