FTSE 250 oil exploration firm Premier Oil has this morning launched a retail bond on the LSE’s Order Book for Retail Bonds (ORB) exchange offering a 5% annual interest rate and a maturity date in 2020.
Premier is the second oil company to come to ORB and its launch comes
hot on the heels of the recent ‘tap’ offered by EnQuest which added to the £145
million the company raised in February.
The company made a profit of £132 million in the six months to June 2013
and has a market capitalisation of £1.8 billion.
Chief Executive, Simon Lockett, commented ‘We are delighted to announce
the launch of Premier's debut sterling bond which will enable Premier to
diversify its sources of debt finance.
Subsidiary Guarantors
The bond represents senior unsecured debt, although it is guaranteed by
subsidiary companies of Premier, defined as ‘Subsidiary Guarantors’; rather
than the bond being secured against an asset this means that the cash flows of
the subsidiaries will be used to repay bond investors if necessary.
Private investors in these bonds would have the same status as the
company’s banks in the case of default.
Premier has previously issued bonds in the US and the Asian markets, and
Tony Durrant, chief finance officer at Premier, says that despite the fact that
he considers it an atypical issuer of bonds, the company was ‘anxious to take
advantage of the current low interest rate environment by getting a fixed
interest rate at this time'.
North Sea Assets
The bonds have a minimum subscription of £2,000, and multiples of £100 thereafter with interest paid semi-annually in June and December; proceeds of the issue are to be used to increase investment in the North Sea assets of the company.
Mr Durrant said that Premier was happy to buck the recent trend toward
reduced capital expenditure in the resource and commodities sector because it
is a mid-cap company with production levels growing at up to 10% a year, 'Some
of the larger companies have not currently got the capacity to grow production
by that much’ he said. ‘We are raising this capital to allow us to increase our
production levels further.’
At 8:05am today (25th November 2013) Premier Oil PLC [LON:PMO] share price was +0.45p at 318.95p
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