Diversified Energy Company PLC (LON/NYSE:DEC) has announced that on May 30, 2024, the Company closed on an asset backed securitization refinancing, creating the ABSVIII note. Diversified will use the proceeds from the Transaction to repay the outstanding principal of the previously issued ABSIII and ABSV notes, retiring those notes from the Company’s outstanding debt. The additional proceeds from the Transaction will be used to reduce outstanding borrowings under the Company’s revolving credit facility and for general corporate purposes. As previously announced on March 19, 2024, the Company intends to fund a portion of the acquisition of the working interests from Oaktree Capital Management using the Company’s revolving credit facility
The Transaction is backed by collateral securing the ABSIII and ABSV notes representing working interest in Proved Developed Producing (“PDP”) wells. The Transaction was significantly oversubscribed with over $1.7 billion in orders from a broad group of 18 unique investors.
Transaction Highlights
Key Terms
• ABSVIII note amount of $610 million (gross)
◦ Net proceeds of $592 million, inclusive of fees, expenses and interest reserve
• Blended fixed coupon of 7.28%
• Fully amortized expected maturity of March 2033
• Investment-grade ratings for note ABSVIII Class A-1 and A-2 (Fitch Ratings, Inc.)
◦ Class A-1: A rating
◦ Class A-2: BBB+ rating
Sustainability-Linked
Sustainable Fitch has again-provided a Second Party Opinion that the instrument’s Key Performance Indicators align with the International Capital Markets Association (ICMA) framework for sustainability-linked bond principles, highlighting Diversified Energy Company’s commitment to aligning its financing with the Company’s overall sustainability strategy.
Rusty Hutson, Jr., CEO of Diversified Energy Company, commented:
“This transaction marks the eighth ABS since the start of our securitization program in 2019 and signals the confidence in the Diversified business model from the energy structured finance community as well as with the broader capital markets. The transaction was well received by both new and existing investors delivering high demand from the largest order book for an oil and gas securitization. The offering was assigned the first flat “A” rating on an operated PDP securitization and allowed for the Company to achieve an extremely competitive cost of capital. We believe that the record-breaking transaction will change the way people in the energy sector think about this product and the successful execution showcases Diversifieds ability to provide reliable production and consistent cash flows.”
Barclays Capital, Inc. acted as Sole Structuring Agent, Sole Ratings Advisor, and Left Lead Placement Agent.
