SGD New Issue Review : Kris Energy 3Y 6.5%
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NEW ISSUE: KRISENERGY LTD SGD 3Y SENIOR NOTES
Issuer: KrisEnergy Ltd.
Structure: Fixed Rate Senior Unsecured Notes
Issuer Rating: Unrated
Issue Rating: Unrated
Format: Regulation S; Singapore (Sections 274 and 275 of the Securities and Futures Act (Cap. 289)); Issuance off SGD 500 Million Multicurrency Medium Term Note Programme
Tenor: 3 years
Issue Size:SGD  Million
Initial Guidance: 6.5% area
Change of Control: Change of Control put at 101% (if any holder besides First Reserve and Keppel controls more than 30% of KrisEnergy’s issued share capital)
– Consolidated Total Debt / Consolidated Equity ≤ 1.0x
– Consolidated EBITDAX / Consolidated Interest Expense ≥ 1.5x until 31 Dec 2015, and ≥ 3.0x thereafter
– Consolidated Tangible Net Worth ≥ USD 200 million
– Consolidated Sec’d Debt / Consolidated Total Assts ≤0.4
– Minimum Cash within the Group not less than USD15MM
Use of Proceeds: In accordance with the Programme
Payment: Semi-annual, actual/365 (fixed)
Listing/Law/Clear: SGX-ST/Singapore Law/CDP
Not sure if anyone remember they used to raise money at 10.5% ? for their 3Y callable bond back in 2011. That bond was called in Jan this year, 6 months after their IPO at $1.10 in Jul last year (trading at $0.74 last).
Then the bankers went a calling and signed them up for a new SGD 500 mio borrowing programme just last week and here they are borrowing immediately.
Sellable bond because of Keppel Corp’s 31.4% shareholding. Between the 2 top holders, First Reserve (venture capital) and Keppel Corp, they own 76% of the company that specialises mainly in upstream exploration work that depends mainly on their superb sense of oil detection.
Why is the coupon only 6.5% when they are running -137 USD mio in retained earnings and have only turned in small operating profits in 2012 and 2013 ?
Because the banks are going to sell that Keppel Corp ownership angle.
I am no expert on oil exploration companies except we know that it is a sort of gamble and there are few comparable purely exploration companies around because the rest of them usually get involved in the development and production work as well.
The coupon should be higher to reflect the underlying risk, in my opinion. In addition to the VC ownership angle and their fondness for cashing out after an IPO. This strangely worded change of control clause cannot stop them from selling if they really wanted to.
With the help of a friend who comes from a oil expert bank, we dug out Salamander Energy Plc, the closest comparable that operates in S E Asia, with roughly same market cap as Kris.
They have highly erratic earnings since 2006 (more downs than ups), stock price not doing so well and they have 1 outstanding bond in USD.
Salamder Energy PLC
Maturity 6 Jan 2020
Callable 30 Dec 2016
Call Price 104.88
Current Price (unverified) 99.875/100.375
Current Yield (mid) 9.72% to 01/2020
I guess the 6.5% for Kris Energy just purely reflects the Keppel Corp relationship and with Olam fresh on everyone’s minds, this issue will sadly be a sell out.
If I’m not incorrect, the price of the Salamander Bond is adversely impacted by the reality that Salamander is being shopped around and this is in the public domain (“assessing strategic options…… including sale of the Company”). And the change-of-control provision doesn’t provide much in the way of uplift above par. I believe that is holding the bond price back.
First Reserve is probably one of the two or three most successful private equity firms in the oil & gas business. Has an impressive track record – and they have been with Kris since the very early days.
Still – I agree with you about the coupon.
All the best – JC8888
You probably know better.
Brief read up on Salamander and the latest headlines of Spain’s CEPSA eyeing them along with their fragmented ownership base, I notice their bond price rising up 1% in the past month to 100.00 just on the news.
Throwing caution to the wind, Kris will most likely be a sell out issue although I cannot see much further into the future.
Thanks again TH
I understand the orders are “trickling in” to the books, being run by Standard Chart. Perhaps this one will be not quite that warm. I have a sense that Private Equity involvement deters some major players (e.g. Trikomsel’s offering last week being another case in point) – or may be I’m seeing smoke where it doesn’t exist.
Trikomsel is sadly floundering at 98.25/98.75.
And it is a profitable entity as well.
Partly because of IDR weakness and yet Gallant is holding.
Perhaps I just do not understand the retail mindset very well.
Kris Energy books are two times covered
Hello again TH,
I understand the books for the Kris Energy offering closed at 4.30 pm, more than three times covered. In light of my earlier comments today …….. It shows what I know!!
Some facts about Kris Energy from an equity portfolio manager.
1. Former Pearl Energy management team – successfully grew company and sold off to a ME operator.
2. Next few years will be low risk because they are bringing on reserves into production.
3. They farm out the fields to defray costs.
4. They know the Gulf of Thailand and Indonesia like the back of their hands.
5. 2 large fields being explored in Vietnam which should add substantially to bottom line if successful.
From an equity perspective, there is some upside to expect in the coming years.
KRIS ENERGY SGD 3YR
FINAL ORDERBOOK 8X
FINAL GUIDANCE: 6.25% (THE NUMBER)
EXPECTED ISSUE SIZE: SGD 125 – 130MM
New Kris Energy bidding up.
New Kris Energy 6.25% 06/2017
Kris Energy Today