T&T's Petrotrin bonds dip on restructure talk

T&T's Petrotrin bonds dip on restructure talk

Capital Markets Bonds Trinidad & Tobago

Petrotrin's 2019s widened on Wednesday as investors digested the oil company's decision to halt its refining operations at Pointe-a-Pierre in October because of expensive crude import costs, and shift its focus toward exploration and production (E&P).

"It seems a very inefficient way to go about it," one bond buyer said of investing more in E&P. "To be successful in this, Petrotrin will need more [cash] injections from the government."

And to keep more bond investors on the hook, future issuances will likely require guarantees from Trinidad & Tobago's central government, a second investor said.

"The question becomes whether you want to increase exposure to the government as oppose to Petrotrin," the second source said.

The oil company has $850m in bonds maturing next year and these notes widened to a yield of 11.9% on Wednesday evening after starting the day's trading at 10.3% in secondary markets.

Petrotrin currently produces 40,000 barrels per day (bpd) of crude while its refinery has been operating at a capacity of 140,000 bpd, placing a heavy cost burden on the import of crude supplies.

"On balance, this plan leaves the company in the same position as it is today," the first investor in New York said. "E&P would be very small for them."

Falling revenues remains a concern for investors, and Petrotrin needs almost $4bn annually to remain in operation, repay debt and upgrade its infrastructure.

Bond debt stands at $1.1bn - $850m in 2019 notes and $250m in amortizing 2022s - while short-term debt is around $800m. The company has also lost more than $1bn in the last five years.

As previously reported by LatinFinance, Petrotrin has been weighing its options over the best way to refinance this debt for months now.

Petrotrin said in a statement that 1,700 direct jobs would be affected by the refinery's closure. The company plans to import 25,000 barrels of oil equivalent per day and any crude produced will be exported, Petrotrin added.