PTTEP launches innovative instrument amid debt concern
PTT Exploration and Production has become the first non-financial institution in Thailand to launch a hybrid-debt capital instrument.
The Bt5-billion long-term investment will offer interest of 5.85-7.85 per cent per annum, payable every three months.
Rated "AA" by TRIS Rating, the instrument is available for subscription during June 11-14 at Krung Thai Bank, Kasikornbank and Siam Commercial Bank. The minimum subscription is Bt100,000.
"PTTEP is the first non-financial institution to offer a hybrid-debt capital instrument as an alternative long-term investment," Penchun Jarikasem, PTTEP’s executive vice president of the Finance and Accounting Group, said yesterday.
The instrument is subordinated, unsecured and unconvertible with bullet payment and single redemption upon liquidation of the issuer. The proceeds will be used as working capital.
The proposed stepping interest rate is 5.85 per cent for the first 10 years, 6.1 per cent for years 11 to 30, 6.85 per cent from years 31 to 60, and 7.85 per cent thereafter.
However, the hybrid issue is being launched at a time when the three global credit-rating agencies – Standard & Poor’s Ratings Service, Moody’s Investors Service, and Fitch Rating – have expressed concern over PTTEP’s future leverage following its huge capital expenditure programme.
Moody’s last week assigned a negative outlook for the oil and gas giant’s rating, as it submitted a new bid for UK-incorporated Cove Energy that was 25 per cent higher than the previous bid in February. Moody’s said the company’s second major acquisition in less than 18 months could push up its leverage.
At the end of last year, PTTEP’s adjusted debt to proved developed reserves was 10 times, which was already weak for its current rating, Moody’s said. The ratio is expected to rise this year as the company plans to spend US$3.6 billion (Bt113.8 billion), which is likely to result in negative free cash flow.
Cove Energy has upstream exploration and production interests in Mozambique, Tanzania and Kenya. Its principal asset is an 8.5-per-cent stake in the Rovuma Offshore Area 1 project in Mozambique, operated by Anadarko Petroleum Corp.
