02 Jun 16 – Oando Energy Resources (OER), a subsidiary of Oando [JSE:OAO; NSE:OANDO], intends to refinance two of its debt facilities and could consider divesting assets, said CEO Pade Durotoye.
OER defaulted on both its senior secured facility, a USD 450m (original amount) reserve-based lending (RBL) loan signed in 2014, and an USD 350m corporate deal also signed in 2014.
OER was incorporated into Oando plc in May. Since the incorporation took place before receiving lender consent, this triggered a default, with lenders exercising their right to restrict cash payments from lender-held deposits. Following the breach, USD 268.6m was reclassified as short-term debt.
Debtwire, reported in May that the default has made existing lenders nervous about the company, therefore a refinancing is unlikely as it could give some of the lenders the opportunity to exit the loan.
Durotoye said that the company defaulted for tax reasons. “The company risked not getting tax benefits that that they were entitled to as a Nigerian company. The banks were slow to understand this, and so the company decided to take a risk,” he added.
Oando is now keeping up with its repayments, Durotoye said.
The RBL facility, was led by BNP Paribas. Other lenders in the facility are Standard Bank, Standard Chartered, Afreximbank and Natixis.
Durotoye said he was not aware of any reticence from the banks to refinance the debt facilities, although he said he had not yet reached out to these banks to begin discussions over the refinancing. Oando will formally engage with them for refinancing talks before the end of the year, Durotoye said.
Oando is open to additional banks joining the loans for the refinancing, Durotoye said. The company expects the interest rates and maturities for the new facilities to be similar to the existing loans, he said. “But the banks may ask the company to pay some additional fees to re-align risks,” he added.
According to Debtwire intelligence the RBL pays Libor+ 850bps, whereas the corporate loan margin is Libor+ 950bps.
In 2015, the company prepaid USD 238m of its loan facilities through a hedging restructuring, resetting its crude oil hedge floor price from USD 95.35 per barrel to USD 65.00 per barrel. This allowed OER to repay USD 188m of its RBL loan, bringing it down from USD 415m to USD 277m as of March 2015 and to repay USD 51m off its corporate loan, bringing the outstanding amount from USD 338m to USD 287m as of the same date.
The latest debt totals are for end-September 2015, USD 780m of long-term debt, and USD 1.09bn of short-term debt. For the nine-month period it generated USD 175m of EBITDA, down from USD 214m in the corresponding period of 2014.
Oando plc has a market capitalisation of NGN 85.8bn (USD 431m). OER posted revenues of USD 455m in 2015. OER had a net income of USD 16.1m in 2015, compared to a net loss of USD 320m in 2014.
To ease its balance sheet, OER may consider other options, including hedging production and divestments, Durotoye said.
In Nigeria it has the producing assets Ebendo (OML 56), which it has a 42.75% working interest, Qua Ibo OML 13 (40%), OML 60 (20%), OML 61 (20%), OML 62 (20%), OML 63 (20%), OML 125 (15%), Oando’s development and exploration assets in Nigeria are AKEPO OML 90 (40%), OML 122 (10%), OPL 321 & 323 (24.45%), OML 131 (100%), OML 134 (15%), OML 145 (20%).
The company also has interests in Blocks 5 and 12 of the Sao Tome and Principe Exclusive Economic Zone. Oando holds an 81.5% interest Equator Exploration (EEL), which owns a 22.5% interest in Block 12, and a 20% interest in Block 5, according to Oando’s website. Both of these assets are in development.