KCA Deutag likely to downsize high yield bond

Tue Apr 2, 2013 4:58am EDT

LONDON, April 2 (IFR) - Oilfield services company KCA Deutag is considering downsizing its planned high yield bond issue after investors demanded a higher price than the company had expected to pay to refinance loans, a banking source close to the situation said on Tuesday.

The company is now considering leaving some of its existing loans in place, but a formal announcement is expected later today.

There were a number of US accounts that had asked for a premium on the USD860m 7NC3 bond due to potential volatility in the company's operations in Iraq and Algeria, the source said. Unofficial price talk was heard last week around low 8% for the B3 rated senior secured bond, but the source said pricing discussions were wide of that.

JP Morgan is left lead on the deal, and BAML, HSBC, Lloyds and Morgan Stanley are also bookrunners.

Pricing was expected last week following a US roadshow that was held March 18-22, which was followed by a two-day European roadshow which finished last Wednesday.

The source said the bond was more likely to price next week rather than this week. That is because the company will need consent from lenders to leave existing loans in place.

KCA Deutag is owned by Pamplona Capital Management together with funds and accounts managed by GoldenTree Asset Management, EIG Global Energy Partners, and BlackRock Financial Management. Pamplona is the largest shareholder and has a majority on the board.

In March 2011 the company completed a refinancing which included a USD550m shareholder equity injection, of which USD300m was used to pay down senior debt and USD250m to further develop the business.