Citic Resources to sell US$1b bond
Citic Resources plans to raise as much as US$1 billion from selling seven-year bonds to fund its acquisition of Kazakhstan oil and gas assets from its parent, state-owned conglomerate Citic Group, market sources said.
'It's worthwhile for the company to finish the acquisition, and it won't be very difficult to sell the bonds,' said an analyst who requested anonymity.
Citic Resources is rasing the money because it plans to exercise an option by the end of this year to pay US$955 million for half of Canada's Nations Energy, which its parent firm bought in December for US$1.91 billion. Nations Energy's core asset is a 94.6 per cent interest in Karazhanbasmunai JSC, which holds all mineral rights until 2020 to develop the Karazhanbas oil and gas field in Kazakhstan.
As part of a deal to gain approval from the Kazakh government for the acquisition, Citic Group granted a local company the option to buy the other half of Nations Energy.
Investor presentations for the bond sale will start today in Hong Kong before moving to Singapore, Los Angeles, New York and London. Bear Stearns and Morgan Stanley are arranging the sale. Moody's Investors Service assigned the proposed bond a Ba2 rating, two steps below investment grade.
Proceeds from the sale would also be used for general working capital, sources said, citing an e-mail sent to investors.
The spokeswoman of the firm could not be reached for comment.
'If the bond's coupon was at 7 per cent, and the crude oil price stays above US$50 a barrel, the company will have no problem making interest payments,' the analyst said.
Crude for June delivery was at US$61.61 a barrel in after-hours trading on the New York Mercantile Exchange yesterday.
Shares of Citic Resources have been suspended from trading since May 2 'pending the release of an announcement regarding very substantial acquisition and connected transaction', the firm said at the time.
The stock has gained 61.4 per cent so far this year.
Citic Resources plans to buy Kazakhstan assets from its parent firm
Karazhanbasmunai JSC holds all mineral rights to develop the Karazhanbas oil and gas field in Kazakhstan until 2020