Hi guys AFR posted an article on NXT launching corporate bonds
https://www.copyright link/street-talk/nextdc-readies-a-corporate-bond-20180615-h11f2e
I am really excited about the prospect of issuing debt. This action tells me several things
1. Craig S. is feeling more confident about NXT future prospects that he is going to use debt to fund datacentre fit outs. Craig has been very conservative historically and has preferred capital raising's over debt on the balance sheet. Provided NXT can manage the debt appropriately this is a positive for shareholders as the return on equity will be much higher than an equivalent capital raising.
2. NXT are trying to get a funding instrument that will support the long term and capital intensive nature of NXT. This means NXT can be more aggressive with growth and future capital investments. In a video I recently saw Craig called out the requirement for $2 billion to complete all the fit outs. I am also hoping there is expansion outside of Australia into Asia. Singapore makes the most logical sense due to its political and investment stability.
3. There is imminent capital expenditure coming up. My understanding (please correct me if i am wrong) is that when you issues bonds you take the the money and are up for payments irrespective of if you using the money or not. So going to the bond market over the draw down facility with NAB indicates they need to spend money now.
Though there will be increased risks with using debt over capital raising's for shareholders, I am excited about what this is signally from a growth profile. Hopefully we can sell secured bonds at the 4-5% mark. I believe we have facilities at 6% with NAB at present. The rate would be much higher if they went out to market for unsecured bonds.
(20min delay)