KazMunayGas now aims to align six note issues with recent 2017 series

By Susanna Moon

Chicago, Sept. 21 – JSC NC KazMunayGas as issuer and KazMunaiGaz Finance Sub BV are now soliciting consents for six series of notes after a failed bid to amend 10 series held in June.

The notes covered by the consent solicitation are now as follows:

• $1,371,437,000 outstanding of original $1.5 billion 7% notes due 2020;

• $1,130,274,000 outstanding of original $1.25 billion 6 3/8% notes due 2021;

• $406,564,000 outstanding of original $1 billion 4.4% notes due 2023;

• $123,177,000 outstanding of original $500 million 4 7/8% notes due 2025;

• $512,249,000 outstanding of original $2 billion 5¾% notes due 2043; and

• $30,112,000 outstanding of original $1 billion 6% notes due 2044.

The early consent fee will be $2.50 per $1,000 principal amount.

The issuer has scheduled meetings to be held Oct. 13 in London to ask holders to amend the notes.

Specifically, the companies are looking to align the six note series with the $500 million of 3 7/8% notes due 2022, the $1 billion of 4¾% notes due 2027 and the $1.25 billion of 5¾% notes due 2047, according to a company announcement on Thursday.

Under the solicitation, the companies are asking to amend the 2020 notes, the 2021 notes, the 2023 notes and the 2044 notes to modify the term "change of status" to apply if the Republic of Kazakhstan ceases to own or control at least 50% plus one share instead of 75% plus one share or 100% of KazMunayGas. This change is not being sought for the 2025 notes and the 2043 notes, the release noted.

Also, a new definition of the term "company" will be added to include entities not directly or indirectly controlled by KazMunayGas but consolidated with the company under IFRS for financial statements purposes.

The definition of material subsidiary will be amended so that the balance sheet test will be determined by reference to 10% or more instead of 5% or more of group assets and the profit and loss statement test will be 10% or more instead of 5% or more of the group's EBITDA.

The definition of minority company will be amended so that the balance sheet test will be determined using 10% or more instead of 5% or more of group assets; the profit and loss statement test will be 10% or more instead of 5% or more of the group's EBITDA; and references to subsidiary will be replaced with references to company.

Finally, the definition of “consolidated KMG net indebtedness” will be amended to allow the company to deduct cash and temporary cash investments of any member of the group instead of KazMunayGas and KMG Finance only.

The early consent deadline is 5 p.m. ET on Oct. 4. The final consent deadline is 11 a.m. ET on Oct. 10. Settlement has been set for Oct. 20.

The record date is 5 p.m. ET on Oct. 3.

The solicitation agents are Citigroup Global Markets Ltd. (+44 20 7986 8969 or liabilitymanagement.europe@citi.com) and UBS AG, London Branch (+44 20 7568 2133, 203 719-4210, 888 719-4210 or ol-liabilitymanagement-eu@ubs.com).

The tabulation agent is Lucid Issuer Services Ltd. (+44 20 7704 0880 or kmg@lucid-is.com).

Recent consent bid

As previously announced, the companies pulled their bid to amend 10 issues on July 11 after lacking the needed consents for some series.

KazMunayGas began the solicitation for 10 series on June 20, which had also included the following notes not covered by the current bid with an early consent fee per $1,000 par amount:

• $1.6 billion 9 1/8% notes due 2018 with an early consent fee of $1.50;

• $500 million 3 7/8% notes due 2022 with an early consent fee of $2.50;

• $1 billion 4¾% notes due 2027 with an early consent fee of $2.50; and

• $1.25 billion 5¾% notes due 2047 with an early consent fee of $3.00.

Based on the vote count, the proposals would have passed for a “few series of notes” but not for all of the series of notes, and “KMG has resolved not to proceed with the consent solicitation,” according to a company update at the time.

“At the time of KMG's most recent notes issuances in April 2017, KMG's focus was on the placement of the 2017 issued notes,” according to the original release in June. “The current consent solicitation is intended to modify both the notes issued in 2017 and those series of notes issued previously. Additionally, certain changes are intended to make the terms and conditions consistent across all series.”

KazMunayGas is an Astana, Kazakhstan-based state-owned oil and gas company.

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