Seplat issues $650m five-year senior notes

Seplat issues $650m five-year senior notes

Seplat Petroleum Development Company Plc, a Nigerian independent energy company, said on Sunday that it had priced its offering of $650 million in aggregate principal amount of senior notes due 2026.

It said the notes priced at a yield of 7.75 per cent, represented a significant pricing reduction from its $350 million debut issuance in 2018, which was priced at a yield of 9.50 per cent, with a coupon of 9.25 per cent.

The company said in a statement, “The offering was well oversubscribed with demand from 120 global investors from more than 20 countries resulting in a final overbook in excess of $1.1 billion, which was 1.7 times book coverage.”

The oil company had explained that proceeds would be primarily used to redeem the company’s existing USD350 million senior notes and repay drawings under the RCF, without cancelling the commitment thereafter, as well as general corporate purposes.

The planned notes would also allow Seplat to extend its maturity profile, which will support financial flexibility over the medium term.

Rating of the senior notes

Earlier, Fitch Ratings had assigned the notes ‘B-(EXP)’. The Recovery Rating is ‘RR4’. The assignment of the final rating is contingent on the receipt of final documentation with terms and conditions being substantially in line with the information already provided.

According to the rating agency, the new senior notes would benefit from the same upstream guaranty package from Seplat West Ltd, Newton Energy Ltd and Seplat East Swamp Ltd as Seplat’s existing USD350 million 9.25% senior notes due in 2023.

The new notes would be subordinated to the company’s USD350 million senior secured revolving credit facility (RCF) due at end-2023 (following a successful refinancing of the senior notes) that benefits from a pledge over the shares of Seplat West Ltd and Newton Energy Ltd.

“We also view the USD100 million Eland reserve-based lending facility (RBL) due in March 2026 as ranking senior above Seplat’s senior notes,” Fitch said.

The ‘B-‘ Long-Term Issuer Default Rating (IDR) of Seplat incorporates the small scale of its operations, concentration of its asset base in Nigeria (B/Stable) and a historically unstable operating environment in the troubled Niger Delta. The rating also reflects moderate leverage, conservative financial policies and a growing domestic gas business.

The Positive Outlook reflects our view that the Amukpe-to-Escravos oil pipeline will diversify export routes and mitigate cash-flow volatility, and the company’s strong financial profile.