Petroleum Supervisor Dr. Michael Gardosh approved the request by Yitzhak Tshuva's oil exploration companies Avner Oil and Gas LP (TASE: AVNR.L) and Delek Drilling LP (TASE: DEDR.L) to place a lien on their rights to the Leviathan natural gas field in favor of HSBC Holding plc (LSE: HSBA; HKSE: 005; NYSE, Paris: HBC) as collateral for a $250 million loan for each company. In January, Gardosh rejected the companies request for a lien, but changed his position after they amended it.
Noble Energy Inc. (NYSE: NBL) owns 39.66% of Leviathan, Delek Group Ltd. (TASE: DLEKG) units Avner and Delek Drilling each own 22.67% and Ratio Oil Exploration (1992) LP (TASE:RATI.L) owns 15%.
HSBC will extend the loan in two installments. The dollar-linked variable interest loans will bear LIBOR plus 3.5-4.5% annual interest. Avner and Delek Drilling will repay the interest in quarterly installments, and will repay the loan by June 2014.
The loan is basically a bridge loan, until the companies can secure long-term loans to develop their discoveries. They will use the proceeds to develop their current offshore discoveries, including the Noa reservoir, a satellite reservoir of Yam Tethys, and the Tamar reservoir. The money will not be used for exploration.
Avner and Delek Drilling are currently financing its $950 million share of Tamar's development with a $380 million bridge loan from HSBC and Barclays Bank plc (LSE: BARC), which they obtained in June 2010. This loan is due for repayment in June.
The Tamar partners' $8 billion gas supply contract signed with Israel Electric Corporation (IEC) (TASE: ELEC.B22) paved the way for the signing of long-term financing agreements with foreign banks to develop Tamar. However, regulatory permits are still needed for the IEC contract, and the final approval is still weeks away. Only then will Avner and Delek Drilling will be able to obtain the $800 million in long-term financing they need.
Meanwhile, Avner and Delek Drilling's shareholders have agreed to let the companies raise $125 million each in rights issues. They took the HSBC bridge loan into account, and the rights issues will probably at least equal the loan amounts, although the two companies might not raise the full amount approved for the issues.
Clal Finance analyst Yaron Zar told "Globes", "Israel needs electricity, IEC needs gas, and Tamar is the only alternative. I am therefore less worried about financing. It's difficult to say how and when it will happen, but the Tamar project is very profitable and I doubt that the financing will delay its development."
Published by Globes [online], Israel business news - www.globes-online.com - on February 28, 2012
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