Parkland Eyes High-Yield Bond Sales in M&A, Refinancing Push

Parkland Corp., a Canadian fuel distributor expanding in the U.S., is monitoring the high-yield bond market to refinance existing bonds and fund its pipeline of acquisitions, Chief Financial Officer Marcel Teunissen said.

The Calgary-based firm is considering refinancing C$200 million of 2025 bonds and $500 million of 2026 securities which have “relatively high coupons,” Teunissen said in an interview. That’s at a time when the company also plans to continue moving ahead with “a full pipeline” of acquisitions.

“My number one priority -- other than just managing our existing business -- is to grow the Parkland business and we see a lot of opportunity both through acquisition as well as through organic,” said Teunissen. “We look partly to refinancing but of course also partly for our growth that we are pursuing.”

Parkland last tapped the bond market March 9 when it raised C$600 million to help fund the buyback of the company’s 5.75% bonds due 2024 and a portion of its 5.625% bonds due 2025. The transaction garnered about C$1.4 billion in demand from 70 investors, including eight new buyers of the company’s bonds, said Teunissen, who was responsible for the financial management of Royal Dutch Shell’s global portfolio of LNG assets and its emerging new energy business before joining Parkland late last year.

While growth is the first priority, the company is also seeking to reduce its debt ratios over time so it can reach an investment-grade rating in the next five years, he said. In that sense, “for big acquisitions -- as in the past -- we’re also willing to use equity” to stay within the range of leverage ratios communicated to investors.

In the U.S., where Parkland most recently bought a family-owned firm whose largest operation is in Idaho, the company is looking to expand its footprint in the Pacific Northwest, he said. Parkland is also looking to grow via acquisitions in states such as Arizona and Florida and grow its Caribbean fuel marketer SOL Investments, he said.

Parkland, which last year published its first sustainability report, may issue sustainable-linked bonds as soon as next year after identifying some specific targets, he said. “I think it could be a very meaningful part of the way we think of funding and support of low carbon projects that we’re running,” he said.

For instance, Parkland’s Burnaby Refinery in British Columbia uses existing infrastructure and equipment to co-process biofeed stocks such as canola oil and oil derived from animal fats alongside crude to produce low carbon fuels. “We may need to expand that facility,” said Teunissen, and a sustainable-linked bond “would be an ideal instrument to do that.”

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