Primary Preview: Yinson Production Offshore Near-Term Leverage Spike Concerns Offset by Solid Asset Coverage, Contract Backlog, Track Record; Bonds Trade Up on the Break

Reporting: Robert Schach Malaysia-based Singapore-listed floating production, storage and offloading, or FPSO, vessel operator Yinson Production Offshore’s debut $500 million senior secured five-year notes are underpinned by solid asset coverage, a chunky $22.5 billion contracted order backlog and a strong track record, which offset concerns over the group’s expected near-term leverage jump to fund its fleet expansion, sources said. After having initially marketed a $500 million to $600 million bond at an around 10% yield, leads set initial price talk at 10.25% to 10.5% (including a roughly 2 point OID) and fixed the size at $500 million. The deal priced at 98 with a 9.625% coupon and traded up on the break, with the bonds changing hands at 99.25 this morning, one source said. The proceeds will enable the group to repay a $430 million bank loan and boost cash by $70 million. The new bond will sit at the holdco level and be secured by share pledges in the issuer and the parent and upstream guarantees from the group’s material holdcos. The structure includes $2.813 billion of nonrecourse project finance debt secured by six of the group’s newest vessels, while its three oldest vessels are unencumbered. Yinson will be[...]