Nostrum Oil and Gas placed a new issue of Eurobonds in USD amounted to $725mn with the 8% return for the period of 5 years.
According to Interfax, there were international management companies, investment and pension funds, banks and insurance companies participating in the transaction. Investors from the following regions were included into the bid books: the UK – 39%, USA – 40%, continental Europe - 16%, SEA – 4%, CIS – 1%. According to the Bloomberg data, Eurobonds are placed in Netherlands (private placement)
As it was mentioned before, the Company would use borrowed funds to buyout available Eurobonds redeemable in February and November 2019.
Recall that borrowed funds from the new issue the Company would spend to buyout the Eurobonds of Zhaikmunai redeemable in February and November 2019 at the amount of $400mn and $560mn with the interest rates of 6.375% and 7.125% respectively.
Yesterday Nostrum reported that bonds with 7.125% interest rate at the amount of the main debt of $390mn and bonds with the 6.375% interest rate for the amount of main debt of $214mn were accepted for buyout. As a result, the total amount for buyout amounted for $605mn. The offer for buyout expires on July 27.
We positively asses the news about the Company attracting foreign investors, which, in our opinion, represent considerable demand for Nostrum Eurobonds and characterizes the reliability of the Company as an issuer.
The new bonds issue has later maturity date (2022), and respectively, the conditions under which the Company will have to repay them, in particular, price of oil, are different. Concerning this, our recommendation “Sell” does not cover this particular issue.
Regarding the old issue, we consider the Company’s decision to implement the buyout of available bonds to be justified. As we wrote before, by our assessment, the possibility that the Company would be able to repay the bonds on its own are very small. We adhere to our “Sell” recommendation regarding the old Nostrum Eurobonds.