KrisEnergy launches restructuring offer on S$330m of bonds due 2017, 2018

KRISENERGY has launched a consent solicitation exercise to restructure S$330 million of bonds due 2017 and 2018.

Under the proposed terms, the oil and gas producer is asking holders of its S$130 million of 6.25 per cent notes due 2017 to exchange their bonds at full face value for new notes that mature in 2022. Holders of its S$200 million of 5.75 per cent notes due 2018 are asked to exchange their bonds at full face value for new notes due 2023.

The new notes will bear a cash coupon of 2 per cent for the first two years. An additional 2 per cent coupon during that period may be capitalised as additional notes instead of being paid in cash at KrisEnergy's option. After two years, the full 4 per cent mandatory coupon will be payable in cash.

The notes will also bear a variable coupon pegged to the price of Brent crude oil after the first year. If a barrel of Brent hits an average price above US$70 and up to US$80, the notes will pay an extra one per cent per year; if the average price of a barrel of Brent is more than US$80 and up to US$90, the notes will pay an extra 2 per cent per year; if the per-barrel average exceeds US$90, the oil-pegged coupon will be 3 per cent.

The new notes will also replace the current financial maintenance covenants, which require KrisEnergy to maintain certain debt-to-earnings ratios, with incurrence covenants, which simply prohibit KrisEnergy from taking on additional debt while its debt-to-earnings ratios are too low.

If successful, the restructuring will allow KrisEnergy to defer repayment of S$330 million of debt and lower the interest expense on those notes for the first four years, as well as obtain some financial breathing room from relaxed covenants. The oil price-based coupon component, meanwhile, dangles a potential sweetener for existing bondholders.

There is also an early-bird one-time payout of 0.5 per cent of the principal amount for noteholders who tender their acceptances by 5pm on Nov 29.

The consent solicitation meeting will take place on Dec 9.