Moody's places Lancer Finance Company (SPV) Limited's 5.85% Notes due 2016 under review for possible downgrade; Global Credit Research - 22 Jul 2014
Approximately US$ 106, 500,000 of debt affected
New York, July 22, 2014 -- Moody's Investors Service today placed the Lancer Finance Company (SPV) Limited ("Lancer" or the "Issuer") Notes due 2016 under review for possible downgrade as a result of new indebtedness recently incurred by Schahin Hold Co Ltd ("Schahin"), a holding company. Moody's is reviewing the credit impact of the additional subordinated debt which, according to Schahin, will have a second priority lien on the collateral that Lancer pledged to the Noteholders, as well as the sufficiency of the information made available to Moody's to help us assess whether this debt satisfies all of the conditions of the Indenture executed on October 21, 2010 (the Indenture). According to the Indenture, the Issuer is allowed to create liens with respect to Permitted Subordinated Indebtedness as long as such indebtedness satisfies certain pre-defined conditions, including the delivery of satisfactory legal opinions as well as a certificate from an officer of the Issuer, confirming that such indebtedness meets the requirements set out in the Indenture.
RATINGS RATIONALE
The review will focus on the evaluation of the following information, which still needs to be provided to us by the Issuer:
- Final or substantially final legal opinions confirming the second priority lien on all assets of Turasoria and Turasoria LLC, the Owner and the Lessor, respectively, of the vessel that is being chartered to Petrobras.
- Final or substantially final legal opinions confirming the enforceability of the subordination provisions in the jurisdiction of the governing law of the new debt.
- Certificate from an Issuer's officer stating that the new indebtedness meets the requirements of the Indenture.
The review will also include the following information:
- Complete or substantially complete loan documentation related to the aforementioned subordinated debt and the collateral.
- Recent project performance.
- Audited financial statements for 2013 of the Issuer, the Owner and the Lessor.
- Trustee reports confirming the calculation of the debt service coverage ratio for 2013 and year-to-date 2014.
Moody's will endeavor to conclude the review as soon as possible.
Lancer Finance Company (SPV) Limited ("Lancer" or the "Issuer") is a British Virgin Island special purpose company established specifically for the securitization program developed by Turasoria S.A. LLC, a limited liability company formed on August 8, 2001 under the laws of the State of Delaware (the "Company" or the "Lessor"). The Company is wholly owned by the Schahin group (unrated), headquartered in Brazil. Lancer was set up to issue the notes, which have been securitized with the revenues from the Charter Agreement, and to refinance debt from the Company and two affiliates (Turasoria S.A. and South Empire International LLC). On October 14 2010, Lancer issued US$270,000,000, 5.85% notes, due in July 2016 (the "Notes"). Currently, there is approximately $106.5 million of outstanding Notes.
The Company was formed to charter the drill ship SC Lancer (the "vessel") to Petroleo Brasileiro S.A. - Petrobras (foreign currency rating Baa1; negative outlook) for the drilling of oil and gas wells up to a maximum depth of 5,000 meters in waters with a maximum depth of 1,500 meters. The Charter Agreement with Petrobras, dated September 25, 2001, was amended in October 2005, June 2006, October 2008 and July 2009, establishing the contracted daily rate for the use of the vessel. The Charter Agreement has a 14-year term, and will expire on August 13, 2016. SC Lancer is owned by Turasoria S.A., based in Panama, which charters the vessel to the Lessor. Turasoria S.A. is also wholly owned by the shareholders of the Schahin group.
Schahin Engenharia S.A. (unrated) is the operator of SC Lancer under an operating services agreement (the "Services Agreement") with Petrobras. Schahin Engenharia is today the principal operating company of the Schahin group. The group's portfolio of assets under contract with Petrobras include SC Lancer, the Cerrado (a sixth generation drilling vessel), and the Amazonia and Pantanal semi-submersible rigs. Schahin Engenharia also operates Vitoria 10,000, a sixth generation drilling vessel which is owned by Petrobras.
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