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CASE STUDY: Petroleum Development Oman (PDO) Makes Strong Debut with Pre-Export Loan Facility

CASE STUDY: Petroleum Development Oman (PDO) Makes Strong Debut with Pre-Export Loan Facility

Petroleum Development Oman’s (PDO) US$4bn senior secured pre-export term loan facility was the company’s debut credit deal, upsized on the back of strong demand from global investors, and the first ever oil pre-payment financing by the Omani government.

Deal At A Glance

Deal Type: Loan

Deal Structure: Senior Secured Pre- Export Finance

Borrower: Petroleum Development Oman

Sponsors: Ministry of Finance, Ministry of Oil & Gas (Sultanate of Oman)

Governing Law: UK Law

International Financial Adviser, MLA, and Bookrunner: HSBC

Initial MLAs and Bookrunners: Bank of China, ING, Intesa San Paolo IMI, JP Morgan, National Bank of Abu Dhabi, Natixis, Societe Generale, Standard Chartered Bank, SMBC

Legal Advisers to Borrower: Dentons, Sultanate of Oman Ministry of Legal Affairs

Legal Advisers to MLAs: Allen & Overy, Herbert Smith Freehills, Nauta Dutilh

Size: US$4bn

Issue Date: June 2016

Maturity dates: June 2021

Yield: Confidential

Use of Proceeds: To finance capex investment

Background

PDO’s main objective was to secure low-cost financing with a capital efficient structure to fund long term investments into maintaining and growing the company’s asset portfolio.

As this was PDO’s debut capital markets deal, one of the company’s primary objectives was to build new relationships with key global investors and lenders.

The company managed to achieve its core objectives, inking its US$4bn senior secured pre-export term loan facility in June 2016 – a deal that attracted a wide range of global stakeholders.

Transaction Breakdown

The syndication strategy was to underwrite an initial targeted amount of US$3.4bn with 10 bookrunners to secure initial stage momentum. The facility was then upsized to US$4bn, which would among other things allow some of the bookrunners to scale back their commitments.

A successful deal roadshow in London in May 2016 attracted participation from 46 local and international banks, targeting investors potentially interested in creating a relationship with the company and its relationship banks, and increasing their exposure to the Omani oil sector.

The facility was structured as a secured loan backed by future oil production revenues collected by an orphan special purpose vehicle based in the Netherlands, with the fund used as upfront payment to GSO for the delivery of crude oil volumes under a forward sales agreement. The facility has a 5-year tenor with straight line amortisation including a 2-year grace period, and will be repaid from   the proceeds of the sale of crude delivered under the matching FSA.

The deal was closed in record time – about four weeks – with 8 banks, mostly based outside the region, joining as final participants. This allowed the company to upsize the facility to US$4bn.

This was the first time a deal structure of this nature was made available to an Omani borrower, and the first ever oil pre-payment financing executed by an Omani entity.

 

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Bonds & Loans

Bonds & Loans is a trusted provider of news, analysis, and commentary that helps illuminate the most significant issues, events and trends impacting the global emerging credit markets.

 

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