Fitch Ratings has placed
This follows an announcement that substantially all of Wintershall Dea's upstream assets will be purchased by
Post-acquisition, Wintershall Dea's assets portfolio will be substantially reduced and will be represented by upstream assets in
The RWN on the senior unsecured bonds issued by
As the acquisition is expected to be completed in 4Q24, the resolution of the RWP may take longer than the typical six months for a Watch. The transaction is subject to Harbour shareholder approval, regulatory approvals and some other conditions.
Key Rating Drivers
Substantially All Upstream Assets Sold: A substantial share of Wintershall Dea's assets will be sold to Harbour. Assets excluded from the transaction do not generate material cash flows and include Wintershall Dea's operations in
Bonds Assumed by Harbour: Wintershall Dea's outstanding senior unsecured bonds issued by
Other Debt Covered by Cash: Wintershall Dea's other debt (which at
Harbour's Post-Transaction Profile: We believe that post-transaction Wintershall Dea's senior unsecured bonds will be rated in line with Harbour's IDR, and hybrid bonds will be notched down from Harbour's post-merger rating. Our base case forecasts suggest that Harbour's credit profile would be commensurate with the 'BBB-' level following the acquisition.
Post-acquisition, Harbour's combined production is expected to be around 500,000 barrels of oil equivalent per day (kboe/d), broadly in line with that of
For more details on Harbour's post-acquisition profile see 'Fitch Places Harbour Energy on Rating Positive Watch on Wintershall Acquisition' published
Derivation Summary
Post-transaction, Wintershall Dea's portfolio will be substantially reduced, which is reflected in the RWN on its IDR. Wintershall Dea's bonds will be transferred to Harbour, and its other debt (represented by the cash-pooling facility) will be fully covered by cash.
We expect Wintershall Dea's senior unsecured bonds to be rated in line with Harbour's post-transaction IDR, which we believe will commensurate with the 'BBB-' level.
Key Assumptions
Crude oil (Brent) price:
Natural gas (TTF) price:
Wintershall Dea's standalone production of around 330 kboe/d in 2024
Wintershall Dea's standalone capex of around
Substantially all of Wintershall Dea's producing upstream assets sold to Harbour
Wintershall Dea's senior unsecured bonds and subordinated hybrid bonds are assumed by Harbour
Wintershall Dea's other debt is paid from its cash balance
RATING SENSITIVITIES
Factors That Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade:
As the rating is on RWN, we do not expect a positive rating action in the short term
Factors That Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade:
Completion of the sale
Liquidity and Debt Structure
Wintershall Post-Transaction Liquidity: Wintershall Dea's cash balance at
Senior Unsecured Bonds at IDR: We assume that Wintershall Dea's existing senior unsecured bonds, together with Harbour's existing senior unsecured bonds, and new bonds to be issued by Harbour following the deal completion will rank equally among themselves and will benefit from broadly the same guarantee package. We hence believe that they are likely to be rated in line with Harbour's IDR.
Wintershall's Hybrid Bonds Notched Down: We assume Wintershall Dea's subordinated bonds with call dates in 2026 and 2029 to be a permanent feature of Harbour's post-acquisition capital structure, as articulated by Harbour's management. The bonds will remain deeply subordinated and are likely to be notched down from Harbour's post-merger rating. We also assume that the bonds will continue to qualify for 50% equity credit, reflecting the hybrids' cumulative interest coupon, a feature that is more debt-like in nature.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.
(C) 2024 Electronic News Publishing, source