Share of Eurobonds in Sovcomflot debt portfolio not to exceed $800 mln-$900 mln
MOSCOW. June 6 (Interfax) - The share of Eurobonds in the debt portfolio of Sovcomflot (SCF), Russia's biggest shipping company, will not exceed $800 million-$900 million, CEO Sergei Frank said on Friday during a road show for the bond offering, one of the participants in the meeting told Interfax.
SCF plans to issue dollar-denominated Eurobonds and use the proceeds to buy back its Eurobonds that mature in 2017 and refinance other debt. The company is prepared to buy out the whole issue at a price of $1,041.25 per bond with face value of $1,000. There are now $800 million worth of bonds in circulation.
Frank did not specify the size of the new Eurobond offering, but said the company has an understanding about the maximum share of such bonds in its debt portfolio. "This source of financing at the company will never be more than $800 million-$900 million," he was quoted as saying by Interfax's source.
He said that "other additional actions in this segment are not planned in the near future."
In addition to an issue of new Eurobonds, SCF can meet its practical objectives in another three or four ways, including by raising project and classic financing, Frank said. The company has access to revolving credit totaling almost $500 million, and can also use project financing of more than $500 million, he said.
These reserves of liquidity completely cover plans for capital expenditures, Frank said. SCF is planning annual capex of $500 million-$600 million, he said.
Commenting on covenants on Eurobonds that provide for an early buyback if the state's stake in SCF falls below 75%, Frank said this refers to the standard procedure for taking into account bondholders' interests. Among other things, it makes it possible to protect the company from turning into a "floating casino," Frank said, referencing Aristotle Onassis.
In any case, the sale of a 25% stake in SCF by the government would be good news for investors in the company's Eurobonds, because 50% of the proceeds from the sale would go to the company, Frank said.
He also said that SCF's debt will never exceed 50% of the value of its assets.
In addition, the company rules out increasing a single customer's share of its order book to more than 20%, Frank said. SCF's largest customer is now Royal Dutch Shell Group with 13.9%, followed by Gazprom with 9.15% and Sakhalin-1 operator Exxon Neftegaz with 7.4%.
The company sees the risks of working with Venezuela's PDVSA, which accounts for 7% of its contracts, as acceptable, Frank said. PDVSA pays more slowly than Shell, and SCF factors this into the price of charter contracts. If PDVSA does not pay, SCF will simply not offload its cargo and tankers can be quickly redirected to other locations in the Caribbean basin, he said.
Asked about the risks of sanctions being extended to SCF, Frank said that the departure of such a big player from the market would lead to charter prices "soaring higher than the Ostankino TV tower."
SCF has been working with U.S. companies since the Cold War era, despite the political disagreements between the respective countries, Frank said.