September 24, 2018

Neconde Energy Limited

Neconde Energy Limited

US$640 Million Senior Secured Medium Term Facility.

Deal Description:

FBN Capital Limited was mandated by Neconde in July 2015 to act as the structuring Bank and Financial Modelling Bank and one of the Mandated Lead arrangers to structure and raise a USD640 million corporate facility, which included refinancing its existing debt exposure. Neconde is a Nigeria based oil and gas exploration subsidiary of Gobowen E & P Limited. The transaction involved the refinancing and raising of additional debt from a group of nine lenders. The facility will be utilized as follows: a) Implementation of Neconde’s field development plan and; b) funding cash call obligations under its Joint Operating Agreement.

Deal Appeal

Offtake Agreements – one year offtake contract remaining with Shell due to expire in 2017 and four year offtake contract with Glencore starting in 2017
Hedge – Unique hedge structure which provides additional protection to the lenders against a fall in oil prices.
Hedging Cost Reserve Account (HCRA) – The HCRA was set up to be funded by the borrower at financial close. The HCRA will then be periodically “topped up” by the Borrower so that it us able to meet its hedging costs.
Cash Sweep Mechanism – A cash sweep mechanism was built into the banking case model to ensure accelerated repayment of the facility once key conditions are met.
Equity Undertaking – Strong language introduced in the Facility Agreement committing the Borrower to inject equity during 2017.
Others – a) Amended amortization profile in the light of the sector challenges and b) “shackled” sponsor support provisions.

Deal Impact

The decline in oil prices led to a restructuring of all the Reserve Based Lending transactions as the crude oil pricing and other assumptions in place at the time those transactions closed have significantly changed. This transaction was significant because it was one of the very few oil and gas loan refinancing transactions that achieved financial close in June 2016. The transaction was also closed with a uniquely structured hedge in place to protect the lenders against volatile crude oil price movements.