PNG poised to roll over Oil Search loan with UBS, JPMorgan | afr.com

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Street Talk understands PNG’s government is seeking two banks to jointly provide the new funding package and is likely to turn to long-time financier and architect of the initial $1.239 billion funding package, UBS.

Source: PNG poised to roll over Oil Search loan with UBS, JPMorgan | afr.com 

Six banks are pitching to refinance a $1 billion loan underpinning Papua New Guinea’s 10 per cent stake in ASX-listed Oil Search, sources told Street Talk on Monday.

Street Talk understands PNG’s government is seeking two banks to jointly provide the new funding package and is likely to turn to long-time financier and architect of the initial $1.239 billion funding package, UBS.

The second bank is expected to be Wall Street giant JPMorgan, the sources said.

It’s understood the parties are working through the terms and seeking to have a deal signed in the next few weeks. The clock is ticking for PNG whose $904 million collar loan, initially arranged with UBS in February 2014, will mature at the end of the month.

Sources said much discussion was taking place around the duration of the next funding package. While it would make sense for the government to lock in finance for the next three years and take the deal past the next election, they’ll also be thinking about Oil Search’s future.

PNG is well aware of corporate interest in Oil Search – from Woodside Petroleum and others – and as Street Talk revealed at the time even met with Woodside officials as part of the recent takeover talks.

If PNG reckons Woodside or another party may have another nibble at Oil Search, it could make sense to lock in a short-term three-to-six month rollover of the existing agreement.

As it stands, there are two options for PNG. The first is that they don’t re-pay the loan and the collar structure underpinning PNG’s stake would unwind. Further to Street Talk’s item on Monday, sources said this would see only a small pile of Oil Search stock go into the market, with most of the stock already blocked-out under the initial delta-one derivative deal set up by UBS.

However, losing the stake which PNG fought so hard to get is not the government’s preferred path. Hence the refinancing discussions with banks.

Refinancing will have its own challenges. PNG’s initial funding package to secure the 10 per cent Oil Search stake created plenty of controversy across the Torres Strait which would be likely to spark up again.

There is also the issue of the oil price and underlying value of the Oil Search stake. PNG acquired the shares at $8.20 each, while the stock closed at $6.90 on Monday.

Read more: http://www.afr.com/street-talk/png-tipped-to-roll-over-oil-search-loan-with-ubs-jpmorgan-20160207-gmo0qa#ixzz3zcVdge58
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