Last week brought an interesting shareholder update from San Leon, Oisin Fanning’s company, announcing that it has come into receipt of a €500 million bond from the German government. The bond proceeds will be used as part of the company’s ongoing fundraising initiative to implement a complex series of corporate transactions, which will enable them to fully utilise their stake in a Nigerian oil project.
Under the agreement’s terms, San Leon has been given permission to utilise the bond for a duration of three years, using it as a security to raise funds from a third party, while the bond’s legal ownership would continue to stay with the original owners.
Although the company declined to disclose any further details when Cantillon inquired about the generous party who supplied the bond, the terms of such an arrangement or the potentially involved lenders who would sanction loans backed by such a bond – this lack of disclosure could be due to the sensitivity of these negotiations.
The company is expecting the finance deal to reach completion in the next week or so and the funds to be received by the end of the current month. This would allow San Leon to significantly expand its investment in Energy Link Infrastructure (ELI), a company involved in the development of an oil export pipeline and storage system for the OML 18 prospect – a project where San Leon also has a stake.
The incoming funds will also facilitate the settlement with San Leon’s outstanding creditors. Earlier this year, the company had made an unsuccessful attempt to raise funds. It had announced an expectation for a $187 million finance agreement from Tri Ri Asset Management based in New York, but the first tranche of the funding never arrived.
The recent update shared that the company has been having discussions with two external financial entities and has been offered acceptable commercial conditions from both prospective funders. Though the discussions continue, the notion of capitalising on German bond appears to be the most promising at the moment.
The company also indicated in the update that “ELI’s funding needs have increased, and the refinancing has been negotiated with that increase in mind”. Fanning will be hopeful that the current refinancing, backed by the German bond, does not hit a roadblock. Results should be visible by the end of June.