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Shoreline to sell $2 billion worth of bonds to buy oil and gas assets in Africa

07 Jul 2015
Financial Nigeria

Summary

The company has approached the major international ratings companies and is looking to sell the $2 billion worth of bonds in three or four tranches.

Kola Karim, CEO, Shoreline Group / Photo: Bloomberg

Shoreline Group, the Nigerian indigenous conglomerate with interests spanning oil and gas, power, infrastructure, telecommunication, among other industries, plans to sell $2 billion worth of bonds to purchase energy assets in Africa.

According to Kola Karim, 46-year-old CEO of Shoreline Group, the debut issue will be up to $500 million Eurobonds and could come up before the end of the year. “The winner of this market is going to be the guy who has access to not only local, but international capital,” Karim told Bloomberg. “I’m bullish about gas and gas infrastructure. If this country is going to grow that’s going to be huge,” he said.

With crude accounting for around 60 percent of its overall business, Shoreline produces about 60,000 barrels of oil per day. Its oil and gas subsidiary is among the indigenous oil producers that account for about 20 percent of Nigeria’s production of 1.9 million barrels a day.

Karim is optimistic that investors would be keen to “back the right horse” even after a drop of more than 40 percent in crude prices over the past year. He said Shoreline is looking to acquire oil and gas assets in Equatorial Guinea as well as Tanzania, where the country holds East Africa’s biggest natural-gas reserves after Mozambique.

The CEO of Shoreline said the company has approached the major international ratings companies and is looking to sell the $2 billion worth of bonds in three or four tranches. According to him, Shoreline’s rating should be in line with Nigeria’s, which is rated Ba3 by Moody’s Investors Service and BB- by Fitch Ratings, which is three levels below investment grade. Standard & Poor’s rating for Nigeria is a step lower at B+.

According to Bloomberg, investors may use the bonds of Kosmos Energy Ltd. and Tullow Oil Plc, both of which operate in Ghana, as benchmarks for Shoreline’s proposed bond sale. As of Monday, July 6th, the yield on Kosmos’s $300 million bonds due in August 2021 rose 16 basis points to 8.72 percent, compared with 11.64 percent at the end of January. Tullow’s $650 million worth of notes maturing in April 2022 have a current yield of 8.40 percent, from 11.11 percent in December. That compares with rates of about 3 percent on $1.75 billion of 10-year debt issued by Exxon Mobil Corp., the world’s largest crude producer by market value.

“The appetite is there,” Karim said. “Look at the rate of return in Europe or for a money manager in North America. And then look at the rate of the return in Nigeria. Where would you get 7 percent in the U.S. or Europe? You can only still get those returns in Africa.”


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