EM CEEMEA CREDIT: DNONO: New issue Mandate USD 500mn 5NC3
Mar-13 13:31
DNO ASA (DNONO: -/-/-)
New issue Mandate: USD 500mn 5NC3
FV: 8.375%
- DNONO is holding investor meetings for a USD 500mn 5NC3 bond. Proceeds will be used to refinance the existing USD350mn outstanding of the 7.875% 26 bonds. DNO issued a 9.25% Jun29 bond last year, which is callable in 2027. Approx USD50mn of the proceeds were used to buy back the 26’s. The 29’s have two covenants, minimum liquidity of USD40mn and equity ratio of 30% or min total equity of USD600mn.
- DNONO announced acq of Sval Energi on 7th March for USD1.7bn. We expect some of the proceeds of the bond offering - USD150mn together with the USD900mn of cash on balance sheet and the USD100mn of reserve bank lending facility will be used to finance the majority of the acq.
- The acq is significant, it boosts production by two thirds to around 140k boepd and increases 2P reserves by 50% to 423mn boe. Based on mgt est on a pro-forma basis the acq is expected to increase EBITDAX from USD422mn to USD1.85bn and cash flow from operations from USD432mn to USD997mn.
- DNO ASA is not rated by the agencies but based on pre-acquisition financials on a standalone basis we view the company as a B/B+ credit. DNO operates mainly in the North Sea and Kurdistan region of North Iraq and West Africa (hence our EM coverage). Prior to the acquisition DNO had a conservative balance sheet with more cash than debt and leverage and coverage ratios not relevant. However, the capital structure will change with the acq and given the size of the company, the overall credit profile of the co could improve.
- Our feeds show the DNONO’s existing bond 9.25% 29’s are around Z+ 400bp or 7.87% yield. Using Azule Energy (B2/-B/B+) as a peer with the 8.125% Jan 30 around z+425bp or 8.1% yield. Adjusting for the uncertainty around the acquisition we sketch FV of 8.375%.
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