CQS RIG FINANCE FUND LIMITED
Monthly Shareholder Fact Sheet
CQS Rig Finance Fund Limited (the "Company"), a closed-ended investment company
incorporated in Guernsey, is pleased to announce that its Monthly Fact Sheet for
September 2011 is now available on the Company's website (www.cqsrigfinance.com)
and includes further information on the top ten investments and outstanding
The sell-off in risky assets witnessed in August continued into September. The
ongoing absence of a credible solution to the European peripheral debt crisis,
as well as the downgrade of several US financial institutions by Moody's,
provoked further panic in markets. September saw moves not experienced since the
financial crisis of 2008/9 and selling became increasingly indiscriminate as
some institutions liquidated positions to meet redemption requests from their
investors. Net issuance of European high yield debt fell to €2.1bn in the third
quarter, the lowest quarterly amount since the second quarter 2009. Commodities
also sold off and the price of Brent Crude fell 10% to close the month at $103
per barrel. With the Merrill Lynch Euro High Yield Credit Index and the
EuroStoxx 50 Index down 3.4% and 5.3% respectively, the Company's NAV performed
relatively well, falling less than one percent to close at 28.17 pence. Most
bonds in the portfolio were marked down during the month, in line with the wider
high-yield credit markets. Losses were partially offset by carry on the
portfolio and a small final cash payment received from the bankruptcy estate of
MPU Offshore Ltd.
There was positive news regarding another of the Company's legacy workout
positions, which made substantial progress in September. At an Extraordinary
General Meeting held on 13 September the shareholders of Ramunia Holdings Bhd.
passed a resolution approving the purchase of the MT Laurita. This vessel forms
part of the collateral package for the FPS Ocean bonds held by the Company.
Should this sale proceed, the Company may receive a recovery payment which we
believe would have a material positive impact on the NAV.
Despite volatility in the wider markets investment into offshore oil production
capacity continues apace. Petrobras opened the tender process for another 21
ultra-deepwater (UDW) rigs to be built in Brazil. This makes a total of 26 rigs
to be built in Brazil by 2016.
Day rates for UDW drillers appear to be stabilising around $500k per day.
Seadrill recently announced two new contracts, potentially adding $1.1bn to its
backlog. Meanwhile, Tullow Oil Ghana Ltd., a subsidiary of Tullow Oil plc, has
awarded Seadrill a one-year contract for operations offshore Ghana with the
newbuild UDW semi-submersible rig 'West Leo'. The potential contract revenue for
the one-year period is $204m which includes $18m in mobilisation revenue. In
addition, the rig can earn a daily performance bonus of up to 10 percent. 'West
Leo' is currently under construction at Jurong Shipyard in Singapore with
delivery scheduled for the end of January 2012. In addition, Seadrill entered
into a memorandum of understanding with a major oil company for a five-year
contract for operations in North America with the UDW semi-submersible rig 'West
Capricorn'. The potential contract value for the five-year period is $919m,
which includes a $30m mobilization fee. The oil company has the right to extend
the contract term for two additional one-year periods.
Finally, in addition to the changes made to the fact-sheet last month, this
month we are including a short summary of each of the top ten positions in the
portfolio. Please refer to the section entitled Investment Details.
For further information, please contact:
Kleinwort Benson (Channel Islands) Fund Services Limited
Director, Corporate Finance
020 7012 2000
All market data sourced from Bloomberg and JP Morgan European Credit Research.
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Source: CQS Rig Finance Fund Ltd via Thomson Reuters ONE