Capital/Financing Update • Apr 9, 2024
Capital/Financing Update
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Mon 08 Apr, 2024 - 1:05 PM ET
Fitch Ratings - Milan - 08 Apr 2024: Fitch Ratings has maintained Leviathan Bond Ltd's USD1.75 billion notes 'BB' rating on Rating Watch Negative (RWN).
Leviathan Bond's debt is a monetisation of NewMed Energy's 45.34% interest in the Leviathan gas project, off the Israel coast. The notes are non-recourse to the sponsors and are ultimately secured on the interests and rights of NewMed Energy in the project.
The RWN reflects the refinancing risk related to Leviathan's USD600 million bullet maturity in June 2025. The ongoing Israel-Hamas conflict and corresponding geopolitical risks heighten the project's exposure to potential infrastructure damages, operational disruptions, and negative impact on existing offtake agreements.
Geopolitical risks in the region continue to evolve with limited visibility of the duration and outcome of the conflict.
In this context, Fitch has maintained the RWN considering that a USD600 million tranche of Leviathan Bond is due to be repaid in June 2025. Although Leviathan is highly cash-generative and currently has a strong liquidity position, there is no full visibility that the debt can be repaid in full. This exposes the project to refinancing risk in a heightened risk environment, with potential damage to the project's infrastructure and disruptions to its operations and potential negative impacts on offtake agreements.
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
Leviathan Bond's financial performance has materially exceeded expectations with cash flow available for debt service of USD638 million at December 2023, exceeding expectations in the Fitch rating case by USD62 million.
The issuer has been able to build up solid 1P and 2P gas reserves, despite the slight decrease to 381 billion cubic metres (bcm) and 430bcm at December 2023 from 391 and 441bcm at December 2022, respectively.
The project's liquidity position is sound. According to management, as of 20 March 2024, Leviathan Bond's debt payment fund was fully funded at USD100 million. This is complemented by substantial cash in its accounts.
The principal sources of information used in the analysis are described in the Applicable Criteria.
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.
| Leviathan Bond |
LT | BB Rating Watch Negative |
BB Rating |
|---|---|---|---|
| Ltd/Project | Watch | ||
| Revenues - Senior |
Rating Watch Maintained |
Negative | |
| Secured Debt/1 LT |
Analyst Primary Rating Analyst +39 02 3055 3163 [email protected] Fitch Ratings Ireland Limited Sede Secondaria Italiana Via Morigi, 6 Ingresso Via Privata Maria Teresa, 8 Milan 20123
Associate Director Secondary Rating Analyst +44 20 3530 1729 [email protected]
Senior Director Committee Chairperson +44 20 3530 1396 [email protected]
Athos Larkou London +44 20 3530 1549 [email protected]
Additional information is available on www.fitchratings.com
The rated entity (and/or its agents) or, in the case of structured finance, one or more of the transaction parties participated in the rating process except that the following issuer(s), if any, did not participate in the rating process, or provide additional information, beyond the issuer's available public disclosure.
Infrastructure & Project Finance Rating Criteria (pub. 17 May 2023) (including rating assumption sensitivity)
Solicitation Status Endorsement Policy
Leviathan Bond Ltd EU Issued, UK Endorsed
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