نديم
29-11-2006, 01:31 PM
Qatari LNG Shipper Nakilat Rated 'A'; Senior Debt Rated 'A+' (Prelim); CCR Outlook Stable
LONDON, November 29, 2006 - Standard & Poor's Ratings Services said today it assigned its 'A' long-term corporate credit rating to Nakilat Inc., the wholly owned liquefied natural gas (LNG) shipping subsidiary of Qatar Gas Transport Co. Ltd. (QGTC). The outlook is stable.
At the same time, Standard & Poor's assigned its preliminary 'A+' long-term secured debt rating to Nakilat's proposed $850 million bonds, and its preliminary 'A-' long-term subordinated secured debt rating to the company's proposed $200 million-$300 million subordinated bonds, all due 2033.
Final ratings on the proposed senior and subordinated bonds will be issued on receipt and satisfactory review of all final transaction documentation, including legal opinions. Accordingly, the preliminary ratings should not be construed as evidence of final ratings. If Standard & Poor's does not receive final documentation within a reasonable timeframe, or if documentation departs from materials reviewed, we reserve the right to withdraw or change the ratings.
Nakilat, which is registered in The Marshall Islands, was established for the sole purpose of acquiring up to 27 LNG vessels (initially acquiring 16 LNG vessels, increasing to up to 27 LNG vessels over time) to provide shipping services to four Qatari LNG producers (the Charterers).
Nakilat aims to fund the initial 16 vessels with about $3.8 billion of senior secured debt, $474 million of subordinated secured debt, and $474 million of equity. The senior debt will be split roughly between $3.1 billion of senior secured debt from commercial bank loans and bonds, about $500 million from the Export-Import bank of Korea (KEXIM; A/Stable/A-1), and $225 million from Korea Export Insurance Co.
Standard & Poor's expects Nakilat to issue about $850 million of senior secured bonds. We also expect Nakilat to issue $200 million-$300 million of secured subordinated bonds. The ultimate split between subordinated bank facilities and bonds has yet to be determined.
The corporate credit and preliminary debt ratings principally reflect the strategic importance of Nakilat and QGTC to the State of Qatar (A+/Stable/A-1). Qatar is undertaking an ambitious investment program, driven by state-owned Qatar Petroleum (QP; A+/Stable/--), to generate substantial revenues for the state by producing and selling LNG in world markets.
"Nakilat and QGTC have a pivotal role in generating these revenues, and the viability of both entities will depend on the Qatari state's strategy and support for developing its LNG sector," said Standard & Poor's credit analyst Karim Nassif.
The corporate and preliminary debt ratings also reflect our expectation of timely state financial support for Nakilat and QGTC if they encounter financial difficulties, so long as Qatar continues to pursue its current LNG strategy. The one-notch differential between the corporate rating on Nakilat and the sovereign rating on Qatar reflects both the presence of implicit state support for the entity, and the absence of explicit financial state support in the form of a guarantee or equivalent. The preliminary senior secured debt rating is underpinned by the available security package and structure of the debt financing. We consolidate the credit quality of Nakilat and QGTC, and regard them as a single entity.
The corporate credit and preliminary long-term debt ratings reflect a number of key credit strengths, including: Nakilat's indispensable position in the Qatari LNG chain; the long-term fixed price, availability-based nature of the vessel charter contracts; and structural support for Nakilat's cash flows, provided through a cash waterfall structure controlled through a designated offshore security trustee, offshore accounts, and a solid security package that is substantially similar to other well-secured transactions featuring vessel mortgages.
These strengths are offset by a number of risk factors, including: Nakilat's dependence on the Charterers, and their ability to successfully build and operate LNG facilities and manage their exposure to LNG buyers; a highly leveraged financial structure, with low minimum debt service cover ratios, some interest-rate risk, and some refinancing risk in 2025; and the susceptibility of charter revenues to deductions due to off-hire events.
"Increases to operating, repair, and maintenance costs over the amount budgeted in charter payments could reduce operational cash flows from base case assumptions," said Mr. Nassif. "Charter contracts contain some weaknesses in the termination and force majeure clauses, which could interrupt the anticipated flow of charter funds."
"We expect Nakilat to remain a pivotal element of the Qatari sovereign strategy to develop its LNG sector, and that in the event of financial distress, the Qatari government would provide timely support to avoid a default on Nakilat's debt," said Mr. Nassif. "Ultimately, the ratings will be underpinned by the credit quality of the sovereign and its national LNG-sector strategy."
LONDON, November 29, 2006 - Standard & Poor's Ratings Services said today it assigned its 'A' long-term corporate credit rating to Nakilat Inc., the wholly owned liquefied natural gas (LNG) shipping subsidiary of Qatar Gas Transport Co. Ltd. (QGTC). The outlook is stable.
At the same time, Standard & Poor's assigned its preliminary 'A+' long-term secured debt rating to Nakilat's proposed $850 million bonds, and its preliminary 'A-' long-term subordinated secured debt rating to the company's proposed $200 million-$300 million subordinated bonds, all due 2033.
Final ratings on the proposed senior and subordinated bonds will be issued on receipt and satisfactory review of all final transaction documentation, including legal opinions. Accordingly, the preliminary ratings should not be construed as evidence of final ratings. If Standard & Poor's does not receive final documentation within a reasonable timeframe, or if documentation departs from materials reviewed, we reserve the right to withdraw or change the ratings.
Nakilat, which is registered in The Marshall Islands, was established for the sole purpose of acquiring up to 27 LNG vessels (initially acquiring 16 LNG vessels, increasing to up to 27 LNG vessels over time) to provide shipping services to four Qatari LNG producers (the Charterers).
Nakilat aims to fund the initial 16 vessels with about $3.8 billion of senior secured debt, $474 million of subordinated secured debt, and $474 million of equity. The senior debt will be split roughly between $3.1 billion of senior secured debt from commercial bank loans and bonds, about $500 million from the Export-Import bank of Korea (KEXIM; A/Stable/A-1), and $225 million from Korea Export Insurance Co.
Standard & Poor's expects Nakilat to issue about $850 million of senior secured bonds. We also expect Nakilat to issue $200 million-$300 million of secured subordinated bonds. The ultimate split between subordinated bank facilities and bonds has yet to be determined.
The corporate credit and preliminary debt ratings principally reflect the strategic importance of Nakilat and QGTC to the State of Qatar (A+/Stable/A-1). Qatar is undertaking an ambitious investment program, driven by state-owned Qatar Petroleum (QP; A+/Stable/--), to generate substantial revenues for the state by producing and selling LNG in world markets.
"Nakilat and QGTC have a pivotal role in generating these revenues, and the viability of both entities will depend on the Qatari state's strategy and support for developing its LNG sector," said Standard & Poor's credit analyst Karim Nassif.
The corporate and preliminary debt ratings also reflect our expectation of timely state financial support for Nakilat and QGTC if they encounter financial difficulties, so long as Qatar continues to pursue its current LNG strategy. The one-notch differential between the corporate rating on Nakilat and the sovereign rating on Qatar reflects both the presence of implicit state support for the entity, and the absence of explicit financial state support in the form of a guarantee or equivalent. The preliminary senior secured debt rating is underpinned by the available security package and structure of the debt financing. We consolidate the credit quality of Nakilat and QGTC, and regard them as a single entity.
The corporate credit and preliminary long-term debt ratings reflect a number of key credit strengths, including: Nakilat's indispensable position in the Qatari LNG chain; the long-term fixed price, availability-based nature of the vessel charter contracts; and structural support for Nakilat's cash flows, provided through a cash waterfall structure controlled through a designated offshore security trustee, offshore accounts, and a solid security package that is substantially similar to other well-secured transactions featuring vessel mortgages.
These strengths are offset by a number of risk factors, including: Nakilat's dependence on the Charterers, and their ability to successfully build and operate LNG facilities and manage their exposure to LNG buyers; a highly leveraged financial structure, with low minimum debt service cover ratios, some interest-rate risk, and some refinancing risk in 2025; and the susceptibility of charter revenues to deductions due to off-hire events.
"Increases to operating, repair, and maintenance costs over the amount budgeted in charter payments could reduce operational cash flows from base case assumptions," said Mr. Nassif. "Charter contracts contain some weaknesses in the termination and force majeure clauses, which could interrupt the anticipated flow of charter funds."
"We expect Nakilat to remain a pivotal element of the Qatari sovereign strategy to develop its LNG sector, and that in the event of financial distress, the Qatari government would provide timely support to avoid a default on Nakilat's debt," said Mr. Nassif. "Ultimately, the ratings will be underpinned by the credit quality of the sovereign and its national LNG-sector strategy."