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CQS Rig Finance Fund Ltd (RIG)

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Tuesday 21 September, 2010

CQS Rig Finance Fund Ltd

Shareholder Update August 2010






                          CQS RIG Finance Fund Limited

                            Commentary - August 2010


Equity  and  credit  markets  came  under  pressure  again in August due to weak
economic  data.  Investors  continued  to  remain  concerned  about a double-dip
recession  and deflationary  fears which  resulted in  the S&P  500 Index losing
around  4.7% during the month. Crude oil prices  declined 9% to end the month at
approximately USD 72 per barrel.

The Company's estimated NAV per share closed up 6% at 26.46 pence against 25.03
pence at the end of July.

Gains  were  mainly  attributable  to  two  holdings  in the portfolio after the
following announcements:

Remedial  (Cyprus) PLC had previously exclusively appointed Clarkson Offshore to
manage the sale and auction process for substantially all of the assets owned by
Remedial  and its subsidiaries. In August it was announced that it had agreed to
sell  the Elevating  Support Vessel  under construction  at Yantei  Raffles to a
subsidiary of the shipyard. The consideration would be USD 55 million to be paid
in  two instalments. On the basis of this  purchase price and the release of the
Remedial's obligations under the Yantei Construction Contract, it is anticipated
that the transaction will have a value of approximately USD 90 million. The full
proposal  can  be  seen  at  www.stamdata.no.  The  proposal was approved by the
bondholders on 3rd September 2010.

Rowan Companies, Inc. announced that it had priced a public offering of USD 400
million  of its 5% senior notes due  2017 in a registered public offering. Rowan
expects  the proceeds from the  notes offering to be  used for general corporate
purposes,  including the potential repayment of indebtedness of Skeie Drilling &
Production  ASA (SKDP). The specific mention of early repayment of the SKDP debt
caused  the bonds to trade  up further as investors  analysed the call prices of
the bonds.

There  was also a new  issue in August from  Floatel International. The 2nd lien
bond  pays a  13% coupon and  matures in  2015. Floatel has  ordered two dynamic
positioning  semi-submersible accommodation vessels from Keppel FELS Shipyard in
Singapore.  The first  vessel, "Floatel  Superior", was  delivered on 18th March
2010 and  commenced first  charter immediately  on delivery.  The second vessel,
"Floatel  Reliance", is  under construction  and is  scheduled for delivery late
2010. Further information can be found at www.floatel.se. The Company subscribed
for, and was allocated, an amount of the new issue.


All market data sourced from Bloomberg.


[HUG#1445852]








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Source: CQS Rig Finance Fund Ltd via Thomson Reuters ONE