Petrofac’s new refinancing plan requires $275M capital raise

Energy services provider Petrofac has decided to raise $275 million through new equity to create a long-term, sustainable capital structure and pay off existing debts as part of its refinancing plan.

Petrofac announced on Tuesday that it would raise gross proceeds of approximately $275 million through the issuance of up to 173,597,412 ordinary shares, at an issue price of 115 pence per new share.

Sami Iskander, Group Chief Executive of Petrofac, said: “Following a quieter period during the pandemic, we see activity in our markets increasing significantly at a time when the full potential of our business has been unlocked – in recent years we have refocused on compliance, rebased our cost competitiveness, and now we are re-energised under a new team and a new strategy. The completion of the financing will cement a fantastic platform from which I am confident that we will deliver significant shareholder value over the coming years.”

According to the company, the capital raise of $275 million is part of a wider refinancing plan, which comprises of $500 million bridge financing facility, which is expected to be replaced or refinanced by way of public bond issuance. The plan entails a $180 million new revolving credit facility, a $50 million new bilateral facility and an amendment of a $50 million existing bilateral term loan facility.

Petrofac has confirmed that the proceeds from this capital raise will be used not only for the refinancing plan and available cash reserves but also to pay the $106 million penalty due in January and February 2022. This was imposed in relation to the SFO investigation. It will also be used to repay existing indebtedness.

Recently, Petrofac’s legal problems were sorted out, after a UK court ordered the company to pay a fine of about $105 million in sentencing related to seven historic bribery offences. The sentence was issued following Petrofac’s plea agreement in late September with the UK Serious Fraud Office (SFO) in relation to its investigation into the company’s historical use of agents.  

The company is confident that its new actions will extend its debt maturities and strengthen the platform to execute its strategy. The capital raise will be effected by a firm placing of $138.0 million (£100.2 million) and a placing and open offer of $137.0 million (£99.4 million).

René Médori, Petrofac Chairman, commented: “Support from all our shareholders and debt providers in the refinancing plan will provide the company with a stable platform from which to grow and look to the future with confidence. I welcome the continuing support of our largest shareholder and fellow Board member Ayman Asfari, as Petrofac moves on to the next chapter of its history.”

The firm says that Ayman Asfari irrevocably committed to investing at least $38 million in the capital raise and to vote in favour of the corresponding resolutions at the general meeting. Goldman Sachs International and J.P. Morgan Securities are acting as joint bookrunners to Petrofac in connection with this capital raise, while J.P. Morgan is acting as the sole sponsor.

Ayman Asfari stated: “I am pleased to support today’s fund raise which, after more than four difficult years, puts the company squarely back on the path to recovery. I look forward to Sami and his leadership team restoring Petrofac to its greatest potential.”

The company’s strategy aims to deliver revenues of $4-5 billion (with more than 20 per cent from new energies), consistent premium margins and a strong balance sheet with a net cash position over the medium term. Petrofac claims its refinancing plan will create long-term, sustainable capital with appropriate leverage and a maturity profile that supports the firm’s strategic plan.

The company’s refinancing plan aims to deliver key objectives including reducing indebtedness, diversifying Petrofac’s sources of capital by accessing the debt capital markets and extending the maturity profile of the firm’s financing arrangements. This should provide long-term certainty, flexibility, balance sheet strength, improved liquidity, and ultimately an appropriate capital structure to deliver Petrofac’s strategy.

Successful delivery of its strategy, along with the implementation of the refinancing plan, should enable Petrofac to grow its businesses and generate increased surplus cash flow. Therefore,  the board believes that the refinancing plan is the best solution available to support the delivery of Petrofac’s strategy.