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San Leon’s curious German bond security

Oil explorer made a beneficiary of €500m German government bond

San Leon will be allowed to utilise the bond for three years by applying it as security to obtain finance from a third party.

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Cantillon
Sat Jun 15 2024 - 06:00

A most intriguing shareholder update from Oisin Fanning’s San Leon came last week, in which the company announced it had been “made a beneficiary of a €500 million German government bond” as part of its ongoing efforts to raise funds to execute a complex set of corporate deals that will allow it to fully exploit its stake in a Nigerian oil prospect.

Under the terms of the deal, San Leon will be allowed to “utilise the bond for a period of three years by applying it as security to obtain finance from a third party, although the legal ownership of the bond will remain with the owners”.

When Cantillon asked San Leon who was so generous as to provide the use of their bond, or the terms of such an arrangement, or the identity of any possible lenders who would provide loans guaranteed by such a bond, the company was not inclined to be any more forthcoming.

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That’s perhaps understandable given the sensitivity of such negotiations. What we do know is that the company expects the financing deal to be finalised within the next week or so and the funds to be received before the end of this month.

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That would allow it to make a greater investment in a company called Energy Link Infrastructure (ELI), which is building an oil exporting pipeline and storage system for the OML 18 prospect, in which San Leon also has a stake.

The money would also help settle with the company’s outstanding creditors.

San Leon has previously attempted to raise money to no avail. Earlier this year it announced that the first tranche of an expected $187 million financing deal from New York-based Tri Ri Asset Management had simply not arrived.

The latest update noted that San Leon is in discussions with two other financing partners and had “received acceptable commercial terms from two of these prospective funders”. While “negotiations remain ongoing” the German bond idea was “the most likely outcome now”.

The company also noted in the update that “ELI’s funding requirements have increased, and the expected refinancing has been negotiated with that in mind”.

Fanning will be hoping that with the German bond behind him, this current refinancing will not fall through. We shall find out by the end of June.

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