Moscow/London: Fitch Ratings has assigned Kuwait Energy plc’s (Kuwait Energy, B-/Stable) $250m 9.5% notes due 2019 a final senior unsecured B- rating.
“We rate the notes at the same level as Kuwait Energy’s Long-term foreign currency Issuer Default Rating (IDR) of ‘B-‘ and cap their Recovery Rating at ‘RR4’ due to the company’s exposure to Egypt (B-/Stable),” Fitch in a statement said.
Bondholders will benefit from guarantees provided by certain subsidiaries of Kuwait Energy (the initial guarantors) that together with the issuer represented 78.7% and 81.4% of Kuwait Energy’s consolidated EBITDAX and average daily working interest production, respectively, for the three months ended 31 March 2014. Kuwait Energy expects to use its best efforts to cause Kuwait Energy (Eastern Desert) Petroleum Services SAE (the post-closing guarantor) to issue a note guarantee within 120 days of the issue date. Together, the issuer, the initial guarantors and the post-closing guarantor represented 100% of Kuwait Energy’s consolidated EBITDAX and average daily working interest production, respectively, for the three months ended 31 March 2014.
Proceeds from the notes will be used to refinance existing debt and to fund capital projects.
“Kuwait Energy’s ratings take into consideration its track record of producing hydrocarbons in difficult geographic areas in which it is present i.e. Egypt, Yemen, Oman, its experienced management, and its prudent attitude to debt funding, with financial metrics on a par with oil & gas companies rated in the ‘BB’ rating category. Constraints on the company’s ratings include its small size, limited reserves, operations mainly through quasi- production-sharing agreements (PSAs) with national oil companies, as well as its focus on a limited number of production areas, dominated by Egypt, and a significant ongoing gas development project in Iraq,” the statement added.
“The Stable Outlook reflects our expectation that Kuwait Energy will be able to maintain adequate liquidity and sustain and/or increase output over the medium term, despite operating in countries with high geopolitical and economic risks.”