Kuwait Energy aims to close $100m loan facility by year-end

Kuwait Energy plans to close by the end of this year a reserve-based lending (RBL) loan facility of up to $100m, sources familiar with the situation said.

The Kuwaiti oil and gas exploration and production company, with assets in Egypt, Iraq, Oman and Yemen, is likely to obtain the financing on a bilateral basis from the European Bank for Reconstruction and Development (EBRD), the sources said. However, a source at the company added that other lenders were also being considered.

A reserve-based lending facility is a loan secured by undeveloped oil and gas reserves of the borrower.

The transaction will not be syndicated “mostly because of bad timing – markets are shutting down and people, including borrowers, don’t want to be hostages of the fact that banks no longer have balance sheet for the year,” said another source.

Kuwait Energy will use the financing to back its operations at the Abu Sennan, Area A, Burg El Arab and East Ras Qattara fields in Egypt, according to an EBRD document issued in October this year. The company source added that part of the loan proceeds would also be used to support the firm’s capital expenditures at its Block 9 oil asset in Iraq.

Kuwait Energy issued in 2014 a $250m senior unsecured bond with a 9.5 per cent coupon, maturing in 2019.

At the end of October this year, Fitch Ratings placed Kuwait Energy’s credit rating of ‘B-‘ and the ‘B-‘ rating of the company’s outstanding bond on rating watch negative, citing increasing liquidity risk.

According to Fitch, Kuwait Energy could potentially deplete its cash reserves before year-end should it not manage to raise the required debt financing, which Fitch estimated would total $150m divided between a pre-payment facility of up to $100m and an RBL facility of up to $50m.