SGD New Issue Review : MEDCO ENERGI GLOBAL PTE LTD 3Y Low 6%

ISSUER:  Medco Energi Global Pte. Ltd.
GUARANTOR: PT Medco Energi Internasional Tbk
SERIES: 001
STATUS:   Direct, unconditional, unsubordinated and unsecured Notes
RATING:   Unrated
FORMAT: Reg S, S274 & 275 of SFA, issuance off SGD500 Million Multicurrency Medium Term Note Programme
ISSUE SIZE:  TBD
TENOR: 3-Year
INITIAL PRICE GUIDANCE:            Low 6s
REDEMPTION UPON CHANGE OF CONTROL: Yes, in accordance with the Programme
REDEMPTION FOR TAXATION REASONS:   Yes, in accordance with the Programme
FINANCIAL COVENANTS:  (i) Maximum Consolidated Total Debt to
Consolidated Tangible Net Worth of 3.0:1
(ii) Maximum Consolidated Secured Debt to Consolidated Total Assets of 0.25:1
(iii) Minimum Consolidated EBITDA to Consolidated Net Interest Expense of 1.0:1
INTEREST PAYMENT:   Semi-annual, actual/365 (fixed)
DENOMINATION: SGD250K
DETAILS: Multicurrency Medium Term Note Programme / Singapore Law / CDP

– New Medco Energi SGD 3 year announced, driven by strong anchor interest
– Initial Price Guidance: low 6s
– Issue size: TBD
– Timing: This week’s business, as early as today

Comps:

KRIS ENERGY 5.75 08/18: 99.00, 6.08%
KRIS ENERGY6.25 06/17: 100.50, 6.00%

CREDIT HIGHLIGHTS**

–  Medco Energi is the largest publicly-listed oil and gas exploration and production company in Indonesia.  Encore Energy, which is owned by Panigoro family (60.6%) and Mitsubishi corporation (39.4%), owns 50.7% of Medco Energi.

–  The Group has a large undeveloped reserve base for production growth with 290 MMBOE of 2P oil and gas reserves, predominantly in Indonesia

–  Revenue for FY2014 was US$750.7 million with the Group’s oil and gas   business contributing 93% of revenues. EBITDA margin was 35% for the same period.

–  Medco has a competitive cost structure with cash cost of production at         US$17.4/boe

–  The Group’s assets are well positioned near key demand growth centres in Asia from Indonesia to Japan, Korea and Singapore. Medco’s major Senoro upstream and downstream LNG project is targeted to start commercial   production in 2H 2015 and provide a boost to revenues and production from 2015.

OIL EXPLORATION ???

They must have been waiting for the $61 WTI to bring this out. What I hear is that they failed in the USD space and have turned to Singapore, of course.

They have several bonds out there in IDR and USD and are rated AA- by Indo rating agency Pefindo. Before that, they had a B rating from S&P but was withdrawn in Dec 2014 and thus, they are unrated now.

Well, for 6%, I thought it was a tad low, especially when upstream should be suffering the most. But the fact is that they are the largest kid on the block in good old Indonesia and have been around since 1980 and work closely with Pertamina, Indo’s state owned national oil company.

Exposure in Libya, Oman, Yemen, Tunisia etc is not really comforting, is it ?

Books are in excess of $100 mio as I speak, so I have nothing more to say.