Fitch expects to rate
RATING ACTIONS
Entity / Debt
Rating
Yinson Boronia Production Senior Secured Notes
LT
BB+(EXP)
Expected Rating
Page
of 1
VIEW ADDITIONAL RATING DETAILS
Transaction Summary
Fitch expects the proceeds of this transaction to be used to refinance the original funding of the floating-production storage and offloading (FPSO) unit,
Additionally, Fitch expects that within 60 days of repayment of the original debt the issuer will release the liens on the collateral securing the existing obligations and perfect the collateral of this transaction's notes. This timeline can be further extended by an additional 60 days if the issuer injects equity into the transaction in an amount equal to the first interest payment.
The first interest payment (first principal payment is due in
KEY RATING DRIVERS
Offtaker Obligation Strength Exceeds Petrobras' IDR: The offtaking party in the charter agreement is
Even under distressed environments, these contracts and obligations are likely to be honored and can be differentiated from other corporate debt obligations. The charter contract may be considered an operational/net revenue cost to
Sovereign Event Risk; Transfer and Convertibility (T&C) Mitigated: The transaction's reserve account of six months of debt service and offshore payment obligations offer sufficient protection to mitigate potential transfer and convertibility (T&C) restrictions and exceed
However, event risk is linked to the operating environment, with
Experienced Operator Mitigates Risk: The operator, Yinson Production, is a global player in building and managing FPSOs and operates in
Strong Financial Metrics: Fitch's cash flow analysis has assessed the repayment of the fully amortizing debt, assuming timely interest and principal payments under a nondeferrable sculpted amortization schedule and a cash trapping condition should the debt service coverage ratio (DSCR) fall below 1.15x. Fitch's base case expects the DSCR to be between 1.26x-1.28x, which is in line with investment grade metrics and does not pose a constraint to the transaction's rating. At the 'BB' stress case it drops to 1.10x-1.16x, which remains sufficient for to support the rating.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
As described in Key Rating Drivers, the rating of the transaction is linked to
The other counterparty that could constrain the rating is the operator, whose credit quality is assessed to be near investment grade and as a result, does not limit the rating but could pose a constraint should the credit quality deteriorate.
Finally, the cash flow analysis results in a sufficient output, consistent with ratings in the 'BBB' category and does not currently pose a constraint to the transaction rating. Although the DSCR and ultimate debt repayment depend on uptime, maintenance days, opex and CPI, none of these variables is likely to materially affect the rating under Fitch's stress case.
Any changes in these variables will be analyzed in a rating committee to assess the possible impact on the transaction rating.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
The rating is influenced by transaction counterparties, the operating environment and credit metrics. An upgrade of
CRITERIA VARIATION
The rating assigned is one notch above the offtaker's IDR. According to 'Oil Vessel-Backed Financing Rating Criteria' when determining the strength of the offtaker's payment obligation for sole-offtaker, the strength of the offtaker's obligation is typically equalized or notched down from the offtaker's IDR.
However, in this case, we consider the strategic importance of the charter contract to
USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10
Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.
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.
REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS
A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) that are disclosed in the offering document and which relate to the underlying asset pool was not prepared for this transaction. Offering Documents for this market sector typically do not include RW&Es that are available to investors and that relate to the asset pool underlying the trust. Therefore, Fitch credit reports for this market sector will not typically include descriptions of RW&Es. For further information, please see Fitch's Special Report titled 'Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions'.
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.
Additional information is available on www.fitchratings.com
PARTICIPATION STATUS
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.
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