California offshore operator Sable turns to investors to repay Exxon loan
(Bloomberg) – Sable Offshore Corp., briefly buoyed by a Trump administration push to boost oil production off the California coast, lost roughly half its market value after it turned to equity and bond investors to repay debt owed to ExxonMobil.
The stock of the Houston-based oil driller plunged as much as 55% on Tuesday, to an all-time low of $3.15 per share, after the company said it would raise $400 million through stock and convertible note offerings, therefore diluting existing investors.
The announcement came after repeated struggles to strike a deal to push out debt that comes due in a matter of weeks, even after it dangled some of the highest yields seen in the credit markets this year.
JPMorgan Chase & Co.—which is running the stock and note offering—saw limited investor demand for a Sable loan paying a hefty 15% interest rate, according to people familiar with the matter.
The loan, originally sized at $1 billion, was cut for a second time on Tuesday to $675 million, a separate person said, asking not to be identified because they aren’t allowed to speak publicly. Investors have until 2 p.m. Eastern time to place orders.
Sable’s fortunes have faced a volatile ride over the last year as the company sought to restart oil production off the California coast. It finally resumed some operations in March, ending a hiatus of more than a decade for those oil platforms, after President Donald Trump invoked Cold War-era powers to override state-level opposition to the project. Still, the business remains jeopardized by litigation.
Proceeds from the equity and debt offerings are aimed at refinancing a term loan from Exxon that was set to expire on June 26. The company last week agreed to pay Exxon $30 million to extend the due date to July 24, according to a filing.
That extension is now set to run through July 31, according to people familiar with the matter.
Sable is offering a coupon of as much as 6.5% on the proposed convertible bonds, according to terms of the deal seen by Bloomberg News. The company is also offering a 30% to 35% conversion premium on the bonds, the terms show.
The proposed loan, which carries a 15% fixed rate, has been offered at a discounted price of 97 cents on the dollar. It has a rare two-and-a-half-year maturity, much shorter than the average for U.S. leveraged loans. Sweeteners also include a requirement for the company to repay some of the loan over its life, potentially reducing default risk.
The hurdles faced by Sable in the leveraged loan market stand in contrast to otherwise overall strong investor appetite, enabling several companies to tighten pricing and accelerate deadlines on refinancing and buyout financings.
JPMorgan declined to comment, while Sable didn’t respond to requests for comment. Jefferies Financial Group Inc. was involved in the earlier stages of the loan sale, but is no longer participating, the people said.
