Genel Energy has announced that it has instructed the trustee for the GENEL01 bonds (ISIN: NO 001 0710 882) (‘GENEL01’ or ‘the Bonds’) to summons a bondholders’ meeting to resolve a refinancing of the existing Bonds.

The Company proposes to refinance GENEL01 through a partial early redemption and debt reduction by replacing the existing Bond Agreement with a new USD 300 million bond agreement. Bondholders holding a significant proportion of the Bonds have confirmed their commitment to vote in favour of the proposal.

In the proposal, the Company seeks to reduce its existing bond debt from the currently outstanding USD 421.8 million to USD 300 million, and at the same time extend maturity through amending and restating terms to a new 5 year bond with a coupon of 10% per annum.

Bondholders will, on a pro-rata basis, receive a partial early redemption of USD 121.8 million in cash at the prevailing call premium of 103% of par value. The remaining USD 300 million outstanding Bonds will remain outstanding with the same ISIN but with new and amended terms as set out in the term sheet described in detail in the summons for bondholders’ meeting (available at www.stamdata.com).

The bondholders meeting will be held on 20 December 2017 at 09:00 CET at the premises of Nordic Trustee AS. If approved, cash settlement and amendment of terms are expected to take place on 22 December 2017, subject to approval by the bondholders’ meeting.

The Company has mandated DNB Markets and Pareto Securities as managers for the contemplated transaction.

(Source: Genel Energy)

By John Lee.

Following Iraq’s successful return to the bond markets earlier this year, it is now reportedly planning a $2 billion sovereign bond issue in 2018.

The Governor of the Central Bank of Iraq (CBI), Dr. Ali Mohsen Ismail Al-Allaq [Alak] (pictured), told Reuters that the plan is currently awaiting parliamentary approval.

He added that Iraq’s foreign currency reserves have risen from $46.5 billion at the end of 2016 to $49 billion , helped by the increase in oil prices.

The country’s budget deficit is running at around $15.4 billion to $16.3 billion.

(Source: Reuters)

By John Lee.

Iraq opened the books yesterday on its first independent bond sale in a decade.

Investor demand was huge,” writese Marcus Ashworth at Bloomberg. “The deal was seven times oversubscribed.

The $1-billion, dollar-denominated bond, maturing in March 2023, was expected yield 7 percent, but demand enabled that to be cut to 6.75 percent.

In January, Iraq raised $1 billion of five-year bonds, guaranteed by the United States, at a coupon of 2.149 percent, but this latest bond is not guaranteed and depends on Iraq’s own creditworthiness. It is rated B- by both S&P and Fitch.

Iraq appointed Citi, Deutsche Bank and JP Morgan as joint bookrunners for the issue.

Meanwhile, the yield on the Iraqi 10-year bond (2028) has fallen from 9.3 percent in November to 6.7 percent.

(Sources: Bloomberg, Financial Times)

By John Lee.

The Financial Times reports that Iraq has appointed Citi, Deutsche Bank and JP Morgan as joint bookrunners for a new five-year government bond.

The issue is described as a dollar-denominated, long-dated, benchmark-scale bond; investor meetings scheduled over the coming days.

In January, Iraq raised $1 billion of five-year bonds, guaranteed by the US, at a coupon of 2.149 percent.

(Source: Financial Times)

By John Lee.

Genel Energy has decided to repurchase a nominal amount of USD 252.8 million of Bonds in connection with its recent Buy-Back Offer.

The Bonds will be repurchased at the price offered by each bondholder up to and including 89.90% of par value. The Bonds are being repurchased at a weighted average price of 85.56% of par value.

Settlement of the repurchases pursuant to the Buy-Back Offer will occur on 11 April 2017. The Company will cancel all Bonds repurchased, including current treasury bonds with nominal value of USD 55.4 million.

(Source: Genel Energy)

Genel Energy Holding Company Limited has announced a reverse tender offer (the ‘Buy-Back Offer’) to holders of Genel Energy Finance plc’s (‘the Issuer’) USD 730 million GENEL01 PRO senior unsecured callable bonds with ISIN NO0010710882 (the ‘Bonds’).

All bondholders, subject to legal constraints, are invited to offer Bonds to the Company, being the sole shareholder of Genel Energy Finance plc and guarantor of the Bonds. The Company intends to select one price (‘Maximum Accepted Price’) and buy Bonds offered at and below this Maximum Accepted Price at the price offered by each bondholder (‘Offer Price’).

The Company intends to buy back a minimum of USD 50 million in nominal value of Bonds, and will seek to cancel all Bonds repurchased, including current treasury bonds with nominal value of USD 55.4 million.

The Buy-Back Offer will commence on 30 March 2017 at 09:00 CET and will expire on 6 April 2017 at 16:00 CET. Prior to 09:00 CET on 7 April 2017, the Company will determine the Maximum Accepted Price and consequently the total amount of Bonds to be purchased. The Company may, in its sole discretion, waive, amend, extend, accelerate, terminate or withdraw the Buy-Back Offer at any time.

Information regarding any such amendments will be published under the Issuer’s ticker on www.newsweb.no, the information service of the Oslo Stock Exchange, and www.stamdata.no, the information service of the bond trustee for the Bonds, Nordic Trustee ASA. Cash settlement for the Bonds, including accrued interest, is expected to occur on 11 April 2017.

The Company will only accept offers from a bondholder or beneficial owner of the Bonds (or any person acting as agent, custodian, fiduciary or in another intermediary capacity for a bondholder or beneficial owner) who is not a U.S. person (as such term is defined pursuant to Regulation S under the US Securities Act of 1933, as amended (the ‘Securities Act’)) and who is outside the United States.

The Company has retained DNB Markets as broker to manage the Buy-Back Offer. Eligible bondholders may provide offers for sale of all or a portion of their Bonds through submission of the bondholders offer form (the ‘Bondholders Offer Form’) by e-mail to genel@dnb.no. The terms of the Buy-Back Offer and the Bondholders Offer Form will be published on www.stamdata.no or can be obtained by contacting DNB Markets on +47 2416 9354.

(Source: Genel Energy)

Fitch Ratings has revised the Outlook on Iraq’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to Stable from Negative and affirmed the IDR at ‘B-‘. The Country Ceiling has been affirmed at ‘B-‘ and the Short-Term Foreign-Currency IDR at ‘B’.

KEY RATING DRIVERS

The revision of the Outlook reflects the following key rating drivers:

Iraq’s fiscal position has improved relative to 2015 and 1H16 because of higher than expected oil prices and reduced government spending. We estimate that the budget deficit narrowed to IQD16.5trn or 8.1% of GDP in 2016, from 12.3% of GDP in 2015. The IMF programme agreed in July 2016 is providing a useful policy framework and has helped Iraq’s financing options. However, progress has been slow in a number of areas including surveying arrears, in part due to capacity constraints.

In 2017 we forecast that the deficit will narrow further, to 5.1% of GDP, with higher average oil prices driving strong revenue growth. We incorporate non-oil revenue of IQD8trn (the IMF assumes IQD10.5trn). On the spending side, we forecast 12.1% growth in expenditure after three years of substantial spending declines.

Financing needs will therefore be lower in 2017 and the authorities expect to rely less on indirect monetary financing by the CBI. External financing will play a more dominant role, with funds from the IMF, World Bank, bilateral project loans, a USD1bn Eurobond (with a 100% US guarantee) issued in January and another planned for later in 2017 (without a guarantee). For 2018, Iraq still needs to identify sources of funding to plug the financing gap calculated by the IMF and will likely again focus on external financing.

Identified arrears totalled IQD12.5trn (USD10.6bn or 6.1% of 2016 GDP) at end-June 2016. In October the IMF expected around IQD6.5trn of these arrears to be repaid in 2016 (including most external arrears) and these are included in 2016 spending estimates. The remaining identified domestic arrears are to be repaid in 2017-19 after they have been audited.

Iraq has successfully closed on its offering of a $1 billion sovereign bond issuance guaranteed by the United States of America.

This loan guarantee underscores the strong and enduring commitment of the United States to support the government of Iraq in this critical moment in the fight against Da’esh.

As part of a comprehensive international assistance package – anchored by an International Monetary Fund (IMF)-supported reform program – this guarantee provides Iraq access to low-cost financing essential to delivering critical services to all the people of Iraq, while laying the foundation for long-term stability and growth through economic and institutional reforms.

Today’s issuance of a $1 billion, five-year Iraqi sovereign bond on international markets is backed by a 100 percent guarantee by the U.S. government of the repayment of principal and interest, and was priced at a coupon rate of 2.149 percent.

(Source: US State Dept)

Fitch Ratings has affirmed Iraq’s Long-Term Issuer Default Rating (IDR) at ‘B-‘ with a Negative Outlook. The Country Ceiling is affirmed at ‘B-‘ and the Short-Term IDR at ‘B’.

KEY RATING DRIVERS

Political risk and insecurity in Iraq are among the highest faced by any sovereign rated by Fitch. Progress has been made in pushing back the Islamic State (IS), but the military campaign brings in its wake major reconstruction and humanitarian challenges.

Sectarian and ethnic tensions continue to undermine political stability, relations with the Kurdish Regional Government are volatile and Iraq scores the worst of all Fitch-rated sovereigns on the composite World Bank governance indicator. This reflects not only insecurity and political instability but also corruption, government ineffectiveness and weak institutions.

The bulk of oil production facilities and export infrastructure are located away from areas of insecurity. After expanding strongly in 2015, oil output in the south has stabilised so far in 2016 at 3.5m b/d on average, given lower budgeted government payments to international oil companies, which has constrained investment. Including output from the north, which incorporates Kurdish fields, total oil production totalled 4.6m b/d in July, according to the Ministry of Oil. Given low oil prices we expect the government to budget a similar amount for oil investment in 2017 and we forecast oil production and exports (at 3.3m b/d) to plateau.

Lower oil prices are driving significant deterioration in Iraq’s financial position. Commodity dependence is among the highest of all Fitch-rated sovereigns. Oil accounts for more than 50% of GDP and over 90% of fiscal and current external receipts. The budget deficit in 2015 ballooned to IQD26.4trn (USD22.3bn) or 13.9% of GDP. This was financed by a mixture of T-bill issuance to banks refinanced to a large degree by the CBI (indirect monetary financing), accumulation of domestic and external arrears and multilateral financing.

By John Lee.

Reuters reports that Iraq expects to sell $2 billion in eurobonds in the last quarter of this year, when international aid starts coming in, helping lower its cost of borrowing.

Finance Minister Hoshiyar Zebari (pictured) told the news agency that Iraq expects to receive $600 million in September from the International Monetary Fund (IMF), as the first tranche of a $5.4-billion facility that the organization is expected to provide over three years under a standby agreement announced last month.

Moody’s and Fitch Ratings last month said Iraq’s IMF deal is credit positive. Fitch rated Iraq’s long-term credit at B-, below investment-grade.

(Source: Reuters)