Tamar natural gas prospect partner Isramco Ltd. (Nasdaq: ISRL; TASE: ISRA.L) today signed a term sheet with Deutsche Bank AG (NYSE: DB; XETRA: DTEG) for a three-year $350 million bridge loan. The bank will also provide exclusive financial advice.
The parties are due to close the deal by May 15. Deutsche Bank will help Isramco over three years to obtain all financing needed to develop the Tamar prospect and will work in the coming months to obtain an additional loan of up to $400 million. The financial services that Deutsche Bank will exclusively provide Isramco include advice on currency, interest, inflation, and gas price risks hedging. The bank was given the right to make these hedges under the terms stipulated in the agreement.
The cost of developing the Tamar prospect is estimated at $2-2.5 billion. Isramco owns 28.75% of Tamar. The prospect's other Israeli partners - Delek Group Ltd. (TASE: DLEKG) subsidiaries Delek Drilling LP (TASE: DEDR.L) and Avner Oil and Gas LP (TASE: AVNR.L) (15.625% each) as well as Dor Alon Energy in Israel (1988) Ltd. (TASE:DRAL) subsidiary Dor Alon Energy Exploration Ltd. (4%) - will also have to obtain financing, each according to its share in the prospect. In view of the high development cost, it is clear that Israeli banks alone will not be able to provide the money needed, and the companies will have to go abroad.
Leader Capital Markets analyst Yoav Burgan said, "This is another important positive milestone, albeit expected, in the development of the project. Toward mid-year, we'll know the final development cost. There's a good chance that the other partners will also turn to foreign financing sources."
Isramco's share closed at $57.95 on Nasdaq yesterday, giving a market cap of $157 million. The share fell 0.3% in morning trading on the TASE today to NIS 0.61.
Published by Globes [online], Israel business news - www.globes-online.com - on February 23, 2010
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