Fitch Ratings has assigned Seplat Petroleum Development Company Plc’s (Seplat; B-/Positive) upcoming senior notes an expected senior unsecured rating of ‘B-(EXP)’. The Recovery Rating is ‘RR4’. The assignment of the final rating is contingent on the receipt of final documentation with terms and conditions being substantially in line with the information already provided.
The new senior notes will benefit from the same upstream guaranty package from Seplat West Ltd, Newton Energy Ltd and Seplat East Swamp Ltd as Seplat’s existing USD350 million 9.25% senior notes due in 2023.
The new notes will be subordinated to the company’s USD350 million senior secured revolving credit facility (RCF) due at end-2023 (following a successful refinancing of the senior notes) that benefits from a pledge over the shares of Seplat West Ltd and Newton Energy Ltd. We also view the USD100 million Eland reserve-based lending facility (RBL) due in March 2026 as ranking senior above Seplat’s senior notes.
Proceeds will be primarily used to redeem the company’s existing USD350 million senior notes and repay drawings under the RCF, without cancelling the commitment thereafter, as well as general corporate purposes. The planned notes will allow Seplat to extend its maturity profile, which will support financial flexibility over the medium term.
The ‘B-‘ Long-Term Issuer Default Rating (IDR) of Seplat incorporates the small scale of its operations, concentration of its asset base in Nigeria (B/Stable) and a historically unstable operating environment in the troubled Niger Delta. The rating also reflects moderate leverage, conservative financial policies and a growing domestic gas business. The Positive Outlook reflects our view that the Amukpe-to-Escravos oil pipeline will diversify export routes and mitigate cash-flow volatility, and the company’s strong financial profile.