Prosafe SE, the largest operator of accommodation rigs for offshore oil and gas workers, may issue bonds for a second time this year to refinance its debt, taking advantage of high demand for Norwegian corporate paper.
The Larnaca, Cyprus-based company, which on Jan. 4 issued a 500 million kroner ($90.6 million) seven-year bond with a coupon of 3.75 percent over the Norwegian Interbank Offered Rate, could sell paper at a similar volume and conditions “any time from now,” Chief Executive Officer Karl Ronny Klungtvedt said today.
When the rate difference between bank loans and bonds “is so small, bonds have an advantage with the flexibility they offer,” he said in an interview in Oslo. “We have an asset-based business with vessels that have a long lifespan, and the seven-year bond we just issued is adapted to our business structure. Avoiding very rapid down-payments on debt can be appropriate for us.”
Issuance of Norwegian corporate bonds jumped last year to a record 96.3 billion kroner, with high-yield bonds accounting for 54 percent of the total, according to data from Nordea Markets. Corporate debt sales in the U.S., Europe and Asia surged to $3.89 trillion in 2012 as borrowing costs fell to a record low amid stricter capital rules that are restricting bank credit, according to data compiled by Bloomberg.
“Our philosophy is to raise the money before we need it,” Klungtvedt said. “The primary capital need we have for the coming year is the completion of the two new-builds,” which will cost a total of about $700 million, he said. “We have bank loans in place, but at the same time we have bonds maturing, so for us it would partly be a matter of rolling those over. ”
Prosafe has 361 million kroner of floating rate notes maturing in October and 500 million kroner due in 2016, according to data compiled by Bloomberg. The company had net interest-bearing debt of $706.8 million as of the end of 2012, according to its fourth quarter, published today.
While bank financing will remain the most important source of funding, Prosafe plans to increase “the share of bond loans in our financing mix,” Chief Financial Officer Sven Boerre Larsen said, without providing further details.
Prosafe, which currently owns 11 semi-submersible accommodation rigs, is expanding its fleet as it bets on rising demand for floating hotels for workers as energy companies expand the search for hydrocarbons beneath the seabed.
The company sees growing demand in the North Sea, Mexico and Brazil, it said in a presentation today.
Prosafe posted fourth-quarter net income of $42.3 million, up from $36.5 million a year earlier and beating the $29 million average of nine analyst estimates compiled by Bloomberg. Sales fell 7.1 percent to $113.1 million.
Shares in the company gained as much as 9.2 percent to 56.35 kroner, the highest intraday level since May 22, 2008. The stock traded 5.1 percent higher at 54.25 kroner as of 3:20 p.m. in Oslo, giving Prosafe a market value of 12.5 billion kroner.
Prosafe is the world’s largest owner of semi-submersible accommodation rigs, according to its presentation material published today.