Own AGL (ASX:AGL) shares? Here’s how the company could be set to raise $500m

AGL is rumoured to be hunting down a cool $500 million…
The post Own AGL (ASX:AGL) shares? Here’s how the company could be set to raise $500m appeared first on The Motley Fool Australia. –

The AGL Energy Limited (ASX: AGL) share price continues to trade around all-time lows as the end of 2021 inches closer. Though, the energy giant is getting ready for a fresh new look in the year to come. This will take shape in the form of the company’s planned demerger.

Between now and then, AGL is believed to be looking at ways of getting some more cash onboard. Considering the impacted profitability and free cash flow, additional capital will be needed to help the two demerged businesses in meeting their expenses.

For this reason, rumour has it that AGL Energy is looking at tapping the United States bond market for $500 million.

Where can you find a spare $500 million?

Ahead of the creation of AGL Australia and Accel Energy, sources suggest AGL is chasing $500 million.

Business changes usually come at a cost. Whether that involves restructures, acquisitions, or — in this case — demergers. Although, the main concern for the company seems to be the reasonably high level of debt.

According to reports, AGL Energy is looking overseas to the United States to put its balance sheet in better order. The Australian energy company is rumoured to be seeking $500 million through the US bond market. A number of investment banks including Bank of America, JPMorgan, and Citi are said to be on board with assisting in the deal.

It appears the energy retailer is not exploring an equity raise as an alternative. This idea was shot down by AGL chair Peter Botten in the company’s annual general meeting. Others have noted the difficulty that AGL might have had if it did opt for a capital raise given the weakness in AGL shares.

Furthermore, the rumoured deal is understood to be a part of the company’s debt refinancing. Although, some onlookers are concerned about increased debt levels.

Company debt was around $3.06 billion at the end of June 2021. Whereas, AGL’s equity came in at $5.5 billion — giving the business a debt to equity ratio of 55.6%. Above 40% is considered to be relatively high for a company.

AGL shares under pressure

It has been nothing but pain for AGL shareholders since April 2017, when the company reached an all-time high of ~$27 per share. Since then, it has been a bumpy ride to the downside as increased environmental scrutiny has plagued the energy provider.

Simultaneously, an uprising in renewable assets has pressured the wholesale price of electricity. In turn, AGL’s operations have been feeling a pinch. Both revenue and earnings have been in decline since mid-2020 as the company ploughs money into transitioning its business.

Finally, on a year-to-date basis, AGL shares have fallen 56%. For context, the S&P/ASX 200 Index (ASX: XJO) is up 10% over the same period.

The post Own AGL (ASX:AGL) shares? Here’s how the company could be set to raise $500m appeared first on The Motley Fool Australia.

Should you invest $1,000 in AGL Energy right now?

Before you consider AGL Energy, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and AGL Energy wasn’t one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

More reading

Why is the Origin (ASX:ORG) share price outperforming AGL in November?

Here’s why this top broker is tipping 40% upside for the AGL (ASX:AGL) share price

Does the AGL share price really offer a 14% dividend yield?

The AGL (ASX:AGL) share price has lost 8% so far this month. What’s next?

The AGL (ASX:AGL) share price is at all-time lows. Here’s why this fundie still thinks it’s poor value

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!