Pearl Petroleum upsizes its bond to USD 500 mn at cheaper rate than it paid two years ago

Pearl Petroleum priced a USD 500 mn, five-year senior secured bond at a 10.375% fixed coupon, joint operators Dana Gas and Crescent Petroleum said (pdf) yesterday. Books came in 1.7x oversubscribed, which allows Pearl to upsize the offering from its initial USD 400 mn target to USD 500 mn. The bond matures in November 2031. The hydrocarbon producer, which operates in the Kurdistan Region of Iraq, will use the funds to refinance an existing USD 350 mn bond and pay for further development at the Khor Mor and Chemchemal gas fields.

Pearl is borrowing more, for longer, at a lower rate. The new coupon comes in below the 13% Pearl paid on its USD 350 mn, 3.5-year bond in November 2024, which is the paper this issue refinances. By our math, the annual coupon bill rises to c. USD 51.9 mn from c. USD 45.5 mn. That means the extra USD 150 mn costs Pearl only c. USD 6.4 mn a year in added interest.

Why it matters: Investors are charging less to lend against Kurdistan gas, and they are doing it in a war year. Pearl scrapped a planned bond in 2019 amid slow demand, and in 2024, it had to pay 13% to get one done. This time, investors from the US, the UK, Europe, the Middle East, and Asia took part, and the companies said the transaction closed despite high global bond yields and regional geopolitical uncertainty.

IN CONTEXT- Pearl used the 2024 bond to help fund the USD 1.1 bn Khor Mor expansion. It sells gas from the field under a supply agreement with Iraq’s Electricity Ministry. In August, the Khor Mor partners clashed with the Kurdistan Regional Government.

What’s next: The bond will list on Euronext ABM in Oslo. Retiring the 13% notes, which were due May 2028, removes Pearl’s nearest maturity and pushes its bond debt out to 2031.

ADVISORS- DNB Carnegie and Pareto Securities are joint lead managers.