By Joan Magee
NEW YORK, Feb 18 - Troubled Mexican oil services company Oceanografia, which is at the center of a corruption inquiry, is still trying to negotiate a 60-day extension to the grace period for a coupon payment on its 2015 bonds that expired last Friday, the company’s head of investor relations told IFR on Tuesday.
Jorge Betancourt said the outcome of the delicate negotiations could be known as early as Wednesday morning.
The company is appealing a 21-month suspension from new government contracts amid an anti-corruption investigation into what are said to be “irregularities” in its contracts with state-owned petroleum company Pemex.
The suspension was announced last week.
Oceanografia has said it will sell assets in order to make the overdue payment.
“The banks froze its credit lines, so the company doesn’t have the cash available right now,” said an analyst who covers the company. “But they’ve expressed that they’re trying to solve this.”
One distressed debt investor who said he had off-loaded his Oceanografia holdings told IFR: “I think they’re in big trouble if this sticks and they can’t get government contracts.”
Analysts from S&P said in a 2009 report that Pemex contracts were the company’s “only source of revenue”, adding: “As a result, regulatory and operational developments around Pemex may significantly affect Oceanografia’s prospects.”
Oceanografia is no stranger to difficulties in the capital markets, and indeed both of its debt trades took some work to get over the finish line.
The USD335m 2015 bonds on which it missed the payment priced in 2008 at 98.814 with an 11.25% coupon to yield 11.50%, or 791bp over US Treasuries. The company had to downsize the transaction from the USD375m originally heard in the market.
These 144A/Reg S senior secured notes carry a change of control put at 101 and an equity claw that allows the issuer to redeem up to 35% of the original principal at 111.25. Morgan Stanley was sole bookrunner in that case.
It also printed a USD160m five-year bond at par to yield 12% in October 2013, but only after readjusting pricing terms and cutting the size in half. The transaction was postponed after failing to garner sufficient demand despite having been downsized to USD280m from USD300m and offering a higher 12% coupon prior to that.
The 2018s were secured by a first lien mortgage on two subsea vessels - OSA Goliath and Caballo Marango - the same names given to the two joint issuers, which are wholly owned subsidiaries of Oceanografia. Norwegian shop Pareto was the sole lead.
Despite the negotiations, some on the Street may already be pricing in an extension. The 2018s, trading at 53.00 last week, hit 62.00 bid this morning and were still there in late afternoon.