1- On August 4, 2020, the pricing process of the Issue was completed, in which
offers were received for the purchase of the Bonds in an amount significantly
exceeding the amount offered in the Issue. As a result of the aforesaid, an
agreement was signed on August 4, 2020 between the Issuer and J.P. Morgan
Securities plc and HSBC Bank plc, themselves and as representatives for other
foreign and Israeli purchasers (the “Purchasers” and the “Underwriting
Agreement”, as the case may be), according to which the Purchasers undertook
to purchase from the Issuer, on the closing date, which was scheduled for
August 18, 2020 (the “Closing Date”), Bonds in an aggregate amount of $2.25
billion, subject to the terms and conditions of the Underwriting Agreement.
According to the Underwriting Agreement, the Bonds will be issued in four
series (the “Series”), as follows:
a. Bonds in an aggregate principal amount of $500 million, maturing on June
30, 2023 (in a single payment), bearing fixed annual interest of 5.750%.
b. Bonds in an aggregate principal amount of $600 million, maturing on June
30, 2025 (in a single payment), at a fixed annual interest rate of 6.125%.
c. Bonds in an aggregate principal amount of $600 million, maturing on June
30, 2027 (in a single payment), at a fixed annual interest rate of 6.500%.
d. Bonds in an aggregate principal amount of $550 million, maturing on June
30, 2030 (in a single payment), at a fixed annual interest rate of 6.750%.
The Bond principal and interest are in dollars. The interest on each one of the
Bond Series will be paid twice a year, on June 30 and on December 30.
2. On August 3, 2020, the Issuer received the approval of the Tel Aviv Stock
Exchange Ltd. (“TASE”) for the listing of the Bonds on the TACT-Institutional
system of TASE (“TACT-Institutional”), subject, inter alia, to approvals that
are required pursuant to any law and the closing of the Issue.
3. The full Issue proceeds will be provided by the Issuer as a loan to the Partnership
on terms and conditions identical to those of the Bonds (back-to-back), and
according to a loan agreement to be signed between the Issuer and the
Partnership (the “Loan”). The Loan money is intended to be used by the
Partnership for repayment of the Existing Loans in the sum of approx. $2
billion, the deposit of a safety cushion in the sum of $100 million in accordance
with the terms and conditions of the Bonds, payment of the Issue expenses in
the estimated sum of approx. $30 million, and the balance for other uses
according to the terms and conditions of the Petroleum Commissioner’s
approval as described in Section 7 below (the “Commissioner’s Approval”).
4. To secure the Bonds and the Loan, in the context of the indenture for the Bonds
and the other documents according to which the Bonds will be issued
(collectively: the “Financing Documents”), the Partnership has undertaken to
pledge in favor of the trustee for the Bonds (the “Trustee”), in a first-ranking
fixed charge, its interests in the Leviathan project (45.34%), including its
interests in the I/14 Leviathan South and I/15 Leviathan North leases (the
“Leases”), the operating approvals of the production system and the export
approvals (collectively: the “Pledge of the Leases”), the Partnership’s rights
and the revenues from agreements for the sale of gas and condensate from the
Leviathan project (the “Gas Agreements”), the Partnership’s rights in the joint
operating agreement (JOA) for the Leases, the Partnership’s share in the
project’s assets (including the platform, wells, facilities, and systems for
production and transmission to shore), the Partnership’s rights in dedicated bank
accounts, certain insurance policies and various licenses in connection with the
Leviathan project. The Partnership shall also pledge the shares held thereby in
the Issuer, in NBL Jordan Marketing Limited and in Leviathan Transportation
System Ltd. In addition, the Issuer undertook to pledge in favor of the Trustee,
in a first-ranking floating charge, its rights in all of its existing and future assets
and will pledge in favor of the Trustee its rights in the loan agreement and in its
bank accounts (collectively: the “Pledges” and the “Pledged Assets”, as the
case may be).
According to the Financing Documents, the Partnership’s undertakings to the
Trustee and the bondholders are limited to the Pledged Assets, with no
guarantee or additional collateral.
It is noted that the Pledges that the Partnership shall create in favor of the
Trustee are subject, inter alia, to the State’s royalties according to the Petroleum
Law and to the rights of the parties entitled to royalties in respect of the
Partnership’s revenues from the Leviathan project, including the holder of the
controlling interest in the Partnership, and that the Pledges that the Partnership
has created on its interests in the Leases in favor of the said royalty interest
owners in the context of previous loans it received for purposes of the Leviathan
project shall continue to be in effect also in the period of the Bonds (see Section
7.21.1(a) of the Periodic Report).
5. As is standard in financing transactions of this type, the Financing Documents
determined stipulations, restrictions, covenants and grounds for acceleration of
the Bonds and enforcement of the Pledges.
It is emphasized that the specification presented below constitutes a partial
and non-exhaustive summary of the relevant provisions, and that the
Financing Documents specified, in relation to the various grounds and
covenants qualifications to the covenants and grounds for payment,
including the conditioning of some of them on the existence of a Material
Adverse Effect (MAE) as defined in the Financing Documents, as well as
exceptions, conditions and remediation periods which are not specified in
the description below.
6. The expected rating of the Bonds is as follows:
a. Fitch Rating – “BB (EXP)” on the international rating scale;
b. Moody’s – “Ba3” on the international rating scale;
c. S&P Global – “BB-” on the international rating scale;
d. Maalot S&P – “ilA+” on the Israeli rating scale.
Final rating reports are expected to be released close to the closing date.
7. On August 3, 2020 the Petroleum Commissioner’s approval was received for
the Pledge of the Leases in favor of the Trustee, for the bondholders. The
Commissioner’s Approval provides that, inter alia, the pledge is given to secure
payment of the Bonds whose proceeds are intended for the granting of credit to
the Partnership in the sum of up to $2.5 billion in total, for payment of the
Existing Loans in the sum of up to $2,050 million, the deposit of a safety
cushion in the sum of $100 million, investments in the Leviathan project only
and the financing of the construction of a pipeline for the export of gas from the
Leviathan and Tamar reservoirs.
8. The Underwriting Agreement sets forth closing conditions for the performance
of the Purchasers’ undertaking to buy the Bonds on the closing date, including
that until the closing date there was no downgrade of the Bonds’ rating; no event
with an MAE; the required approvals and permits were received; officer
declarations were received; consultants’ reports and comfort and reliance
letters, as specified in the agreement, were received; the required approval from
the Gas Authority was received, as well as the Commissioner’s Approval
(which, as aforesaid, has been received); approval was received from TASE to
list the Bonds on the TACT-Institutional system, etc.
In the Partnership’s estimation, the said conditions are expected to be fulfilled
in the coming days, and insofar as they are, the Issuer expects to receive the
Issue proceeds on the closing date, i.e., August 18, 2020, against the issue and
listing of the Bonds on the TACT-Institutional system.