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Infrastructure deal of the quarter century: Odebrecht Oil & Gas

Sep 1, 2013

Norbe VIII and IX Drillship bond, 2010

Project bonds have long been seen as a tool that could revolutionize infrastructure finance in Latin America, opening funding possibilities on a scale not possible through bank lending. And as oil production in Brazil's pre-salt fields transforms the scale of that industry, drillships will become a major component of the region's infrastructure build-out. As the first large issue from a Latin borrower for a drilling rig, Odebrecht Oil & Gas's $1.5 billion deal sold in November 2010 wins infrastructure deal of the quarter century for paving the way in the bond market for more such deals. Others, for floating service vessels, wind farms and toll roads, have followed in recent years, piggybacking on the broadening of access for LatAm's corporate issuers.

"The beauty of this bond was that we had already financed the construction of the vessels through bank lending," Roberto Ramos, chief executive of OOG, tells LatinFinance. "And the two drilling rigs were almost ready, allowing us then to place the bonds and with the proceeds, to pay out the bank debt."

The 10-year bond has an average life of eight years with a balloon at the end, which means there is an opportunity to refinance the rigs as the end of the maturity approaches. The bond was priced at 6.375%.

"We also had a construction guarantee issued by Kexim, which then added a nice rating to the construction risk," says Ramos. The two deepwater drillships that were financed - the Norbe VIII and Norbe IX - were built in Korea for Brazil's Petrobras.

This year, OOG is building two pipe rig support vessels (PLSVs) in Korea, in a joint venture with Technip. The vessels again have a long-term contract with Petrobras.

"The construction phase is being financed by bank lending and export credit agencies, and once they're ready - they'll be ready mid-to-end of next year - then we'll be looking at refinancing that through a bond offering," says Ramos. LF



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