Osx Bond Case
I recommend buying the OSX 9.25 2015 bond for 90 cents on the dollar for a YTW of 15% in 2015, but I believe the correct yield is yield to next call (111%), as I believe the company will call this bond in June, 2013 at 103. The bond is secured by a 1st lien collateral on an FPSO that is being built in Singapore (87% completed) that will be delivered on Q4 to the company. Value of the FPSO is 700MM USD as marked on OSX´s book, total debt is 500MM USD.
Eike Batista is the main shareholder of Centennial Asset Mining LLC (Centennial) and EBX Group (EBX), holding companies that own stakes in companies related to mining, oil & gas, logistics, energy and others.
OSX Brasil S.A. (OSX) is a Brazilian company controlled by Eike and Centennial Asset Mining LLC (75% of shares as of 04/22/13). It operates under three segments:
1) Building ships (FPSOs, drilling rigs, etc)
2) Leasing of FPSOs and drilling rigs
3) Services for the oil and gas industry
The bond I´m recommending is issued by OSX 3 Leasing BV and guaranteed by OSX Brasil S.A., OSX Leasing Group B.V. and OSX-3 Holding B.V.
The attractive characteristics of this bond ($500 MM outstanding, 9.25% coupon) is that it is secured by a 1st lien pledge on the OSX-3 FPSO that is being built at the Jurong Shipyard in Singapore (87% completed as of Dec-31-2012) by Modec. The bond may not incur any encumbrance over any of its assets and is very limited to further debt ($50MM USD in currency hedging, $3M in unsecured debt and subordinated loans owed to the Issuer Parent). The bond becomes callable at 103 in June, 2013 and then at 102 in June 2014.
OSX-3 was built to operate on the Tubarão Martelo field in the Campos Basin, Brazil. It has production capacity for 100k bopd, storage of 1.3MM boe, water injection capacity of 150,000 bwpd and it´s designed to operate on a water depth 100-150m. The Campos Basin is the largest oil reserve in Brazil with ~85% of Brazil´s estimated oil reserves.
The OSX-3
Eike Batista is the main shareholder of Centennial Asset Mining LLC (Centennial) and EBX Group (EBX), holding companies that own stakes in companies related to mining, oil & gas, logistics, energy and others.
OSX Brasil S.A. (OSX) is a Brazilian company controlled by Eike and Centennial Asset Mining LLC (75% of shares as of 04/22/13). It operates under three segments:
1) Building ships (FPSOs, drilling rigs, etc)
2) Leasing of FPSOs and drilling rigs
3) Services for the oil and gas industry
The bond I´m recommending is issued by OSX 3 Leasing BV and guaranteed by OSX Brasil S.A., OSX Leasing Group B.V. and OSX-3 Holding B.V.
The attractive characteristics of this bond ($500 MM outstanding, 9.25% coupon) is that it is secured by a 1st lien pledge on the OSX-3 FPSO that is being built at the Jurong Shipyard in Singapore (87% completed as of Dec-31-2012) by Modec. The bond may not incur any encumbrance over any of its assets and is very limited to further debt ($50MM USD in currency hedging, $3M in unsecured debt and subordinated loans owed to the Issuer Parent). The bond becomes callable at 103 in June, 2013 and then at 102 in June 2014.
OSX-3 was built to operate on the Tubarão Martelo field in the Campos Basin, Brazil. It has production capacity for 100k bopd, storage of 1.3MM boe, water injection capacity of 150,000 bwpd and it´s designed to operate on a water depth 100-150m. The Campos Basin is the largest oil reserve in Brazil with ~85% of Brazil´s estimated oil reserves.
The OSX-3