Suncor offers cash for notes
Energy firm looks to trim debt load with $1.5 billion in bond repurchases
Suncor Energy Inc. is offering to repurchase about $1.5 billion of its own notes from bondholders as the company takes advantage of cash on hand to lower its debt load.
Suncor Energy Ventures Holding Corp. has offered cash for notes with maturities between 2019 and 2042 with coupons as high as 8.2 per cent, the company said Thursday in a statement. The offer will expire on June 22. HSBC Holdings PLC and JPMorgan Chase & Co. are the dealer managers.
Sneh Seetal, a company spokeswoman, wasn’t immediately available to comment.
Chief executive Steve Williams has focused on maintaining enough cash — about $3 billion at the end of the first quarter — to get the company through the two-year long commodity downturn while allowing it to continue expanding projects, like the Fort Hills bitumen mine, and making purchases including the takeover earlier this year of Canadian Oil Sands Ltd. Suncor has about $15 billion in total debt, according to data compiled by Bloomberg.
Companies offer to buy back bonds before they mature as a method of reducing overall debt. Borrowing costs for energy companies have fallen relative to similar maturity government debt, as the price of oil has surged since February while global economic concerns push sovereign yields to record lows.
Suncor’s debt-to-capitalization ratio was 29 per cent, while net debt to cash flow was 2.5 in the first quarter, chief financial officer Alister Cowan said during an April 28 conference call with analysts. The company has also identified as much as $1.5 billion worth of assets it can sell.
“We are rigorously managing both our operating and capital expenses while maintaining the strength of our balance sheet,” Cowan said at the time.
The Calgary-based company’s widely traded 7.75 per cent coupon notes due in 2019 were trading at 111 cents on the dollar with a 3.74 per cent yield, according to data compiled by Bloomberg. Its notes with a 4.5 per cent coupon due 2022 were trading at 101.5 cents with a 4.20 per cent yield.