BNP Paribas and Natixis arranged a US$250mn loan for Sterling Energy at the end of 2007, marking the first reserve-based lending (RBL) facility to combine assets housed in both Africa and the US.

The facility enables Sterling Energy to pay off a previous US$100mn bridge loan arranged for the acquisition of Whittier, and is secured against the expected cashflows from Sterling Energy’s assets in the southern US and Mauritania.

Pricing is between 175 and 400 basis points over Libor, depending on the utilisation rate and the contribution of non-OECD assets in the borrowing base, and the tenor is six years.

The security package itself is wide-ranging and benefits from a global assignment covering all the assets of Sterling Energy in the US, including a share pledge over its main subsidiaries, a US mortgage on assets representing 80% of the net present value of the company, the assignment of sales contracts and a pledge over the collection account.

For Mauritania, the security is structured in the most part through the assignment of several local agreements Sterling Energy has in place, in particular the funding agreement it has with the national oil company of Mauritania (SMH).

“The strategy of Sterling Energy is quite an innovative one compared to most small-to-medium-sized E&P companies,” says Laure Pironneau, head of Africa and the Middle East in the upstream and structured finance – energy department at Natixis, initial mandated lead arranger of this facility.

“In our view, Sterling is well-positioned to become one of the principal active players among its peers, with a diversified portfolio that combines internal growth potential with a capacity to acquire and integrate new companies within its group, as has been successfully demonstrated in the past.”

Six years ago, London-listed Sterling Energy was valued at just £10mn (US$19.65mn). Outside the US, today it has energy interests in Gabon, Mauritania, Iraqi Kurdistan, Madagascar, Cameroon, AGC (a joint development zone between Guinea-Bissau and Senegal), and Guinea-Bissau. But in order to acquire stable long-term cashflow for investors and promote its development, Sterling Energy has also maintained a strategic interest in the US. In early 2004 it made its first offshore US acquisition, and the recent acquisition of Whittier has presented another opportunity for Sterling Energy to diversify and strengthen its position across Texas, Louisiana and Mississippi.

Natixis was mandated as the initial MLA on the deal, subsequently joined by BNP Paribas also as an MLA, and Barclays joined as lead arranger in a phase of senior syndication. Law firm Jones Day advised the lenders across UK, French, US, Jersey (Channel Islands) and Mauritanian legal jurisdictions.

Deal Information:




Sterling Energy
Mandated lead arrangers: BNP Paribas; Natixis
Amount: US$250mn
Tenor: 6 years
Law firms: Jones Day
Margin: 175-400bp
Date signed: June 2007