UAE’s Topaz Plans To Raise $550m Loan To Fund Expansion

Dubai-based Topaz Energy and Marine plans to raise $550 million in debt from banks in early 2015 to lower its borrowing costs and fund potential expansion at a time when the oil services market is softening, its chief executive said.

Topaz, a unit of Oman’s Renaissance Services, has chosen investment bank Rothschild to coordinate the raising of a seven-year loan from banks, chief executive Rene Kofod-Olsen told Reuters in an interview.

It plans to use the proceeds to refinance an existing $380 million loan package at a lower interest rate and to provide cash for potential expansion.

“We want to have the firepower should there be any interesting M&A opportunities for us going forward, but also for individual assets,” he said.

Topaz, with around 100 ships that support the offshore energy business in the Caspian Sea, the Middle East and West Africa among other areas, is considering the purchase of two medium-sized vessels designed for subsea work, which would be delivered in late 2016, he added.

The new debt comes on top of a $350 million debut high-yield, five-year bond, which the company sold in October 2013 through its Nico Middle East subsidiary.

It also follows the injection in August of $75 million in capital from Standard Chartered Private Equity in exchange for a 9.8 per cent stake. The bank has an option to invest a further $100 million in the firm, Kofod-Olsen said.

The added financing will help the company weather a slump in the sector as oil prices have fallen by around 30 per cent since June.

Oil companies have started to put off costly new development projects and are expected to cut their capital spending further.

“I think we should brace ourselves for a softening, but I don’t think it’s going to be a long softening of the market,” Kofod-Olsen said, adding that Topaz was going into 2015 with around $1 billion of medium- and long-term contracts.

IPO, UNIT SALE

Topaz is in the early stages of considering a share listing in London, the CEO said, after it was forced to drop an earlier attempt at a $500 million flotation in March 2011.

Should a listing take place, the firm offered to investors would be a different animal due to a number of structural changes since then.

A $2.9 million fraud was uncovered in its business in Kazakhstan a few months after the listing attempt, an event which forced out the previous CEO.

Kofod-Olsen, who took over in June 2012, undertook an internal review, which led to the sale of its oil and gas unit for $46 million in July 2013.

Its shipbuilding business could also be spun off and sold within the next 12 months, Kofod-Olsen said, declining to specify a value other than to say it would not be a big amount.

Topaz expects to spend around $100 million a year on new vessels and other capital investments, the CEO said.

Kofod-Olsen said he wanted to keep down the average vessel age – currently around seven years – to lower repair costs and provide a selling point.