At the 2012 SiLAS conference hosted by Euromoney Seminars and LatinFinance, a panel on rig lease receivable deals sparked hope that the architecture of this sector could be applied to other businesses.
The rig lease deals that have come out of Latin America have been backed by revenues stemming from a charter agreement between Petroleos de Brasil and the operator of a drillship. The proceeds go to the operator, which is able to borrow more cheaply than through other avenues thanks to a contract linked to an internationally recognized, and investment-grade-rated, oil producer.
Speaking on a panel, Eric Farina, vice president at Morgan Stanley, mentioned that pipelines could be financed using similar structures. On the cashflow side, he added, there tends to be low operating risk and sound contracts for energy pipelines. But the asset itself is quite different. Unlike a drillship, “you can’t take a pipeline and send it somewhere else,” Farina said.
The question of precisely how correlated these transactions are to the risk represented by Petrobras also arose during this discussion. “They’re very highly correlated, but there are several details that lead them away from Petrobras risk,” said Bernardo Costa, a director at Fitch Ratings, adding that the “risks related to the operator are higher than those related to Petrobras.”
Roland Vigne, executive director at Nomura Securities, said that the long life of the asset – the drillship – should translate into higher leverage for these sorts of deals down the road.