Firms & Funds

Cobalt International, backed by PE, faces liquidity shortfall: S&P

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Cobalt International, S&P, oil and gas, corporate debt, credit rating
A supporter of Angola's main opposition UNITA party waves their flag during an election rally in Luanda August 25, 2012. Angola's main opposition called on Friday for the August 31 national election to be postponed for a month to allow time to correct a lack of transparency in the poll and violations of the electoral law. Campaigning for the election, only the second in Africa's No. 2 oil producer since the 27-year civil war ended a decade ago, has been marked by wrangling over transparency. Voters will elect a parliament and the leader of the biggest party will then become president. Photo courtesy REUTERS/Siphiwe Sibeko
  • Liquidity shortage possible in next year: S&P
  • Sale of energy assets to Angola fell through
  • Cobalt among firms in First Reserve Fund XI restructure vehicle

Cobalt International Energy could face a material liquidity shortfall within the next 12 months after a $1.75 billion sale of Angola oil and gas assets to state-run Sonangol was terminated, according to S&P Global Ratings.

The debt-research firm said it changed its outlook on Cobalt to negative from stable and said the private-equity-backed Houston company may be forced to sell assets or significantly reduce capital spending.

“We have … revised our assessment of liquidity to less than adequate,” Kevin Kwok, credit analyst at S&P, said in a research note.

Cobalt said August 23 that it didn’t get the necessary approvals from Angola to complete the sale. It also said it’s begun the marketing and sales process for the assets.

It initially warned early in August that the deal appeared unlikely to close.

A year ago, in August 2015, the company said it would sell a 40 percent stake in the fields to Sonangol, but now it must return an initial $250 million payment on the deal, S&P said.

The credit-rating specialist affirmed its CCC+ unsolicited corporate credit rating on Cobalt International. The rating means the company is currently vulnerable and depends on favorable business, financial and economic conditions to meet financial commitments.

First Reserve Corp owns about 9 percent of Cobalt’s public shares. Azimuth Capital Management, formerly Kern Group, lists Cobalt on its website as one of its portfolio companies. Carlyle Group and Riverstone Holdings each own about 8.4 percent of the company’s shares. Paulson & Co owns about 9.4 percent.

Cobalt International Energy common stock made its debut on the New York Stock Exchange under the symbol CIE in 2009 at $13.50 a share. The shares now trade at $1.31, creating a market cap of $547 million.

In its most recent capital raise in public markets, Cobalt sold $1.15 billion in convertible senior notes in May 2014

First Reserve invested $350 million in the company in 2007.

A spokeswoman for Cobalt didn’t return a phone call.

Action Item: Cobalt International Energy: www.cobaltintl.com/

A supporter of Angola’s main opposition Unita party waves its flag during an election rally in Luanda on August 25, 2012. Photo courtesy Reuters/Siphiwe Sibeko