Diversified Gas & Oil PLC (LON:DGOC) has announced the successful completion of a second US$200mln securitised financing arrangement.
The arrangement is arranged Guggenheim Securities, the lead investor is the TIAA (Teachers Insurance and Annuity Association of America) and the company noted that it maintains many of the same significant financial characteristics as the previous arrangement.
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"Against a backdrop of historic credit market volatility and scarcity of capital, I am pleased to announce another successful, low-cost securitisation financing agreement that delivers multiple benefits to the company and its stakeholders,” said Rusty Hutson, DGOC chief executive in a statement.
“Namely, this arrangement strengthens our balance sheet and provides clear long-term visibility on hedged cash flow, both of which support our unwavering commitment to return value to shareholders through our reliable quarterly dividend.”
The debt security has been given an investment grade, BBB, rating from Fitch. It carries a 5.25% coupon and is secured against a 29.4% working interest in proved developed producing upstream assets.
DGOC noted that the debt arrangement strengthens its commitment to sustain its dividend, adding that two-thirds of its debt now resides in long-term, fixed-rate, amortising notes underpinned with long-term hedges and no redetermination risk.
The arrangement boosts the company’s liquidity and balance sheet, and is ‘leverage neutral’ as proceeds will be used to reduce its revolving credit facility.
Hutson added: “The strength and low-risk nature of our business model and current liquidity of nearly US$200 million ensures that DGO is ideally positioned to maintain its dividend, a factor that we believe to be a core pillar of our investment case, while strengthening our position in the market to opportunistically pursue prudent and accretive growth during a time when we expect significant, high-quality assets to become available at compelling valuations.
“It is critically important to me to position DGO to capitalise on this unique ability to grow scale and cash flows for the benefit of our dividend and shareholders.”
"The quality of the investors in this transaction further validates the quality and predictability of our assets and related cash flow, and of equal importance, highlights the positive sustainability element of our investment case,” he concluded.