Capital/Financing Update • Jun 24, 2025
Capital/Financing Update
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June 24, 2025
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The recent escalation of the conflict between Israel and Iran increases the possibility of damage to Israel's strategic infrastructure, such as Leviathan. The conflict, marked by ongoing missile attacks on Israel, resulted in the suspension of Leviathan's natural gas production and platform's operations on June 13, 2025, as per the guidance of the Ministry of Energy and Infrastructure of Israel. Our base-case scenario is that the conflict will not be protracted (less than three months), avoiding drawing in other countries. However, should the missile attacks intensify or Israeli infrastructure be targeted, the risk of potential disruptions to
London 44-2071760864 valeriia.kuznetsova @spglobal.com
London 44-0-2071761209 greg.koniowka @spglobal.com
London 447785466317 elena.anankina @spglobal.com
Leviathan's operations or even threats to its physical asset's integrity would increase, particularly considering that the project is a strategic component of Israel's energy sector and its asset concentration. We continue to monitor the risk of any damage to the project's assets or other limitations on its operations, as well as repercussions for exports and domestic sales. In case of further escalation, physical integrity of assets, continuity of operations and stability, and timeliness of revenue would be our primary focus.
Nevertheless, we do not expect the suspension of Leviathan's operations will have a material effect on the project's credit metrics. We base this primarily on our expectation that the suspension will be less than three months, and the project's available liquidity is sufficient to support its ability to cover both its operational expenditure and debt service. Any nonmaterial maintenance and capital expenditure can be delayed. Of note, the suspension is likely to be viewed as a force majeure event under the gas supply and purchase agreements, mitigating the risks of potential penalties from off-takers. At the same time, Leviathan benefits from insurance coverage for risks of direct damage to assets and indirect damage (loss of revenue or prevention of profits) in the case of war or terrorist actions. This is in addition to compensation provided under Israel's Property Tax and Compensation Fund Law for physical loss affecting the market value due to war or terrorism.
The project's existing liquidity supports its ability to repay the remaining \$200 million of the notes maturing on June 30, 2025. Aside from the existing liquidity of Leviathan, NewMed Energy LP (100% owner of Leviathan Bond Ltd.) has secured committed credit facilities and credit lines totaling \$550 million from Israeli banks for its ongoing operational needs, including the option to use them to repay Leviathan's bonds, although we do not factor this into our rating.
We acknowledge a high degree of uncertainty regarding the scope, duration and effects of the war with Iran, as well as the continued fighting in Gaza. The conflict's onset significantly increased the risk of adverse effects on economic indicators in Israel and capital market volatility. There is already the risk that Israel's main economic indicators could weaken (see "Israel Ratings Affirmed At 'A/A-1'; Outlook Remains Negative," May 9, 2025). As the situation evolves, we will update our assumptions and estimates accordingly.
The CreditWatch placement indicates that we could lower our ratings in the next three months if security risks to the project intensify and threaten operational stability or physical integrity of assets. This could be the case, for example, if the conflict is protracted or escalates into a wider regional conflict, raising the possibility of damage to Israel's strategic energy infrastructure, including Leviathan.
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| Ratings Affirmed; CreditWatch Action; Recovery Ratings Unchanged | ||
|---|---|---|
| To | From | |
| Leviathan Bond Ltd. | ||
| Senior Secured | BB-/Watch Neg | BB |
| Recovery Rating | 1(95%) | 1(95%) |
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