>ABAN (GOLDMAN SACH)

Re-financing by Dec the key issue; E&P capex outlook stays grim

What's changed
Aban needs to re-finance about US$169mn of existing debt in FY10E, and
US$148mn out of that before Dec’09 in order to honour the bullet
payments of Norwegian Kroner (NOK) bonds (from Sinvest) maturing on
22 Dec 2009. This has become the key issue for the company since we
believe Aban has limited options to raise finance by other means in the
current environment.

Moreover, four of Aban’s assets are currently lying idle owing to major
cutbacks in E&P capex globally. Another four of Aban’s assets will be
coming out of contracts in the next six months, increasing the risk of lower
utilisation of assets and pushing up the amount of re-financing needed.


Implications
We believe that Aban stock is now effectively a binary option, with part of
the street viewing that Aban’s cash flows will weaken to a point where refinancing
will look difficult. We, however, believe that it is possible that
Aban will get re-financing, though this could be expensive in the current
environment. News-flow on this remains critical for re-rating of the stock.

To see full report: ABAN