The company has offered investors in its $750m of outstanding bonds - split between a $300m 2011 note and a $450m 2013 deal - for consent to spin off its refining and marketing, and petrochemicals businesses. These will take some of the parent company's debt with them but SK Energy has moved to nullify the structural subordination risk by making both new subsidiaries guarantee the outstanding debt.
The company is offering 10bp (or $1 per $1000 of bonds) to investors in the 2011 bonds who agree to the solicitation and 33bp to investors in the 2013 notes.
Moody's, Fitch and Standard & Poor's are all expected to hold their Baa3/BBB/BBB ratings on the company, but future issues could get a lower rating thanks to the structural subordination. Some analysts speculated the spin-offs were a precursor to SK floating the two operating companies on the stock market, but for now SK Energy owns a full stake in both.
The outstanding 2013 bonds were yielding around 2.949% on Tuesday, slightly tighter than the 3.01% they were quoted at the start of last week, according to a debt banker. But some bankers said the bonds were very lightly traded.
"It's pretty much free money," said Brayan Lai, a credit analyst at Calyon in Hong Kong. "It's not unexpected. The restructuring has been in the pipeline for some time, and with the guarantees from the new subsidiaries, there should be no reason why it shouldn't go through. But in future [issues], you have a very different situation."
source: APEC-VC Korea
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