Petrofac sets initial price thoughts on $500M offering of 5-year notes

Petrofac Ltd. has released initial price thoughts at 10.25%-10.50% on its planned $500 million offering of five-year (non-call two-year) secured bonds. Investor calls conclude tomorrow, Oct. 29, via joint global coordinators Goldman Sachs (B&D) and J.P. Morgan.

Proceeds, along with a concurrent equity raise, will be used to refinance indebtedness and pay for the final £77 million penalty related to charges brought by the U.K.'s Serious Fraud Office, or SFO, for seven counts of failure to prevent bribery between 2011 and 2017. The SFO payment will be payable in the first quarter of 2022.

In addition to the bond deal, the issuer plans to raise $275 million in fresh equity and to put in place a $50 million Abu Dhabi Commercial Bank bilateral facility. The refinancing plans also include a $180 million revolving credit facility. In total, $106 million of the funds raised will be used to pay the SFO penalty charge, according to a company presentation.

Ratings are confirmed at BB-/BB- at S&P Global Ratings and Fitch. First Abu Dhabi Bank and NatWest Markets are joint bookrunners on the transaction.

The company lost its investment-grade credit rating at Ratings in April 2020 on the back of historically low crude oil prices and the cancellation of a $1.5 billion project. Petrofac was further downgraded in March this year to B+, from BB+, after The Abu Dhabi National Oil Company announced it had suspended the company from bidding for further contracts.

The fundraising will translate to net leverage of 1.9x based on EBITDA of $164 million for the last 12 months to June 2021, according to a company presentation. Listed in London, Petrofac is a provider of oil field services to the international oil and gas industry, with operation centered across the U.K., the Middle East and India.