Diversified Energy Company PLC (LSE:DEC, OTCQX:DECPF) said it last week closed a US$365mln sustainability-linked asset backed securitisation (ABS) involving some of its Appalachian assets, which had previously been pledged as collateral under the company's Revolving Credit Facility (RBL) led by KeyBank National Association.
The ABS proceeds will be used to reduce outstanding RBL borrowings and create additional liquidity, allowing the company to pursue acquisitions without having to issue new equity, Diversified Energy said in a statement.
The ABS note carries a fixed coupon of 4.875% and has a Fitch rating of BBB. It is scheduled to fully amortise in November 2030.
The securitised assets constitute 53.7% of the Appalachia assets currently pledged under the RBL, Diversified Energy said.
The RBL borrowing base on the remaining RBL collateral pool is US$550mln, it added, noting that liquidity at end-2021 was around US$316mln.
"We are pleased to close our third ABS note that demonstrates expanding investor support of a financing structure that fits well with the company's production-focused strategy," commented Diversified Energy CEO Rusty Hutson Jr.
"Fully amortising in less than nine years, the ABS structure remains consistent with our stated commitment to systematic debt reduction as we generate strong cash flow. Having issued ABS notes in both 2019 and 2020 to exceptional investors, we now welcome several new quality institutional investors to the Diversified story.
"The increased liquidity with this transaction positions us to further our pursuit of accretive, meaningfully-sized acquisitions without the need to issue new equity, all while maintaining our leverage targets."
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The company noted that the coupon rate on the sustainability-linked financing will be tied to its ESG Assessment from Moody's ESG Solutions.
"[... ] incorporating our ESG score from Moody's ESG Solutions into the coupon of the notes aligns with our steadfast commitment to improving all aspects of our ESG performance," said Hutson.
"We look forward to pursuing additional ABS transactions this year given a favourable commodity price backdrop and increasing investor demand for oil and gas ABS financings underpinned by high-quality assets coupled with a proven operator."