Schahin bonds continue to tumble on more speculation

martes 7 de abril de 2015 17:26 GYT

By Paul Kilby

NEW YORK, April 7 (IFR) - Continued speculation about the financial viability of Brazil's Schahin Oil & Gas prompted another selloff Tuesday in the company's bonds due 2022.

The slump in the company's approximately US$651m outstanding 5.875% 2022s began on Monday following unconfirmed media reports that the issuer was expected to file for court protection in Brazil.

The bonds, backed by charter payments from a single drillship called Sertao, were being quoted as low as 39.00-41.00 earlier Tuesday, adding another 10 point drop to Monday's 10 point plunge.

News Monday that Petrobras would halt five drilling rigs under contract to Schahin then added to concerns that Petrobras could exercise early termination clauses triggered by a bankruptcy or performance issues.

And on Tuesday, talk emerged that the company had already brought the Sertao drillship onshore, raising further concerns among investors over the asset that backs the bond.

"Schahin has been struggling for a while," said a Brazil-based analyst. "The only thing that has stopped the bonds from trading down to the 20s was the collateral. I think this view will be reassessed if the company files for bankruptcy."

Without those payment flows from the charter and service agreements on the Sertao drillship, holders of the 2022s will essentially be forced to lean on the value of the underlying drillship to be made whole.

Prices are now well below the recent low of 56.00 seen in early February when Moody's cut to junk senior secured bonds issued by oil services companies - including Schahin Oil and Gas's 2022s - which rely on offshore charters with embattled state-controlled oil company Petrobras.   Continuación...