(Bloomberg) – Gunvor Group Ltd. seeks to return to the bond market for the first time in eight years, as part of a test of investor confidence in the trading house after buying and canceling its first public debt offering in 2015.
The Geneva-based oil and gas trader wants to sell a five-year US dollar-denominated bond led by banks such as Citigroup Inc., ING Groep NV and Societe Generale SA, Bloomberg News reported on Wednesday. The bond would help diversify Gunvor’s sources of funding, most of which now comes from short-term loans for its trading, refinery and asset operations.
The company, which is the largest independent liquefied natural gas trader, hopes the new issue will fare better than the last time it sold corporate debt. Gunvor sold $ 500 million worth of 5.875% bonds in 2013. However, their value plummeted and the yield on five-year bonds surged when co-founder Gennady Timchenko was placed under US sanctions because of his relationship with Russian President Vladimir Putin.
Timchenko sold his stake to Gunvor CEO and co-founder Torbjorn Tornqvist a day before the sanctions were imposed. Still, the yield on the company’s notes shot up to over 10% on March 21, 2014, after sanctions were imposed on Timchenko, and peaked at over 14% in December of the same year.
Gunvor began to buy back and cancel the bonds the following year. When the company reaped windfall profits of $ 1.7 billion by selling most of its assets in Russia, it decided to buy more bonds and cancel the listing, three years before they matured.
“We have good liquidity and cheaper forms of financing available, so that made sense,” said Seth Pietras, spokesperson for Gunvor in Geneva at the time.
Pietras declined to comment on the potential new bond issue.
Restructure
In the years since the cancellation of the first bond, the company has restructured its operations, closed some of its loss-making refineries, focused on more transient fuels including biodiesel and LNG, and made a profit. records of its trading activities amid the price fluctuations caused by the pandemic. .
But Gunvor hasn’t completely escaped the scandal. In 2019, the company paid Swiss prosecutors around $ 95 million to settle a ten-year-old investigation into bribes paid in Africa to win oil deals. The energy trader has stepped up its compliance operations and said it had learned lessons from the ordeal, pledging to stop using middlemen or middlemen to facilitate oil deals in foreign countries.
Earlier this year, another former employee admitted to paying bribes in Ecuador to win oil contracts. Gunvor said he was cooperating with the US Department of Justice investigation.
As commodity traders thrive amid volatile price swings during the pandemic, they are paying higher fees for bank loans. Trade finance is the lifeblood of the commodities industry, as traders need access to millions of capital to finance the purchase, transportation, storage and sale of commodities. Several banks that were once major players, including BNP Paribas SA, have downsized or left the sector.
Gunvor’s biggest rival, Trafigura Group, has been one of the most active trading houses in tapping debt markets to diversify its sources of funding. Vitol Group, the world’s largest independent oil trader, has not issued any public bonds but has sold private placements to investors.
–With help from Lyubov Pronina.
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