Dolphin and CSFB part company

24 May 2002

Credit Suisse First Boston (CSFB) has had its financial advisory mandate for the Dolphin gas pipeline project terminated. A new financial advisory mandate is yet to be awarded - the possibility remains that Dolphin Energy (DEL) might proceed without an adviser - but DEL maintains that the financing schedule will not be altered.

Accounts of the termination of the contract vary. 'CSFB's contract was ended when it became apparent to DEL that, due to restructuring and other internal issues, CSFB was not as committed to the project as DEL would have liked,' a project source says. Two of the four key CSFB executives working on the project were made redundant in April and rehired as consultants to continue work on the Dolphin project.

'Our internal restructuring in no way brought about reduced commitment to the project,' says a senior CSFB executive. 'In fact, it actually freed up more time for our team working on the mandate. Our plan ran to more than 80 pages and this was not off-the-shelf stuff. CSFB and Dolphin decided to amicably part company because of a difference of opinion over certain aspects of the project.'

The difference of opinion between DEL and CSFB is understood to revolve around elements of support for the project that CSFB thought necessary if the financing risk was to be constrained. 'There are regional precedents for certain structures that DEL appeared unwilling to seek from certain entities and we advised that in their absence there would be more risk associated with the financing process,' says the CSFB executive.

News of the termination of CSFB's mandate has met with surprise from a number of international bankers watching the project closely. 'This is a case of 'did they jump or were they pushed?',' says one. 'The real picture probably won't emerge, but that's not the issue. What matters is what happens next.'

It is understood that no final decision has yet been taken over whether DEL will appoint a new financial adviser or whether it will attempt to do the work internally. 'DEL's new partner [ Occidental Petroleum Corporation] will be on board in early June at which point the plans prepared with CSFB will be reviewed and a decision will be taken over how to move forward,' says a project source. 'This will not have any impact on the financing schedule laid down. It is an uphill task but we are staying with the plan.'

A number of the original bidders for the advisory mandate - among them BNP Paribas, Societe Generaleand HSBC Investment Bank- are expected to be awaiting the decision with interest.

If the current schedule for the expected $2,500 million financing package is kept to, an information memorandum should be issued to banks in late summer and a lead arranging group should be mandated by September. DEL's stated aim is to tap four different sources of finance. It is expected that the maximum amount of export credits will be sought. Plans are still being pursued for a bond issue and for an Islamic finance tranche, with a commercial facility covering the remainder of the financing requirement (MEED 22:3:02).

'The bond component has looked less and less likely as time has worn on,' says another banker watching the deal. 'It'll probably be more expensive, there are painful rating questions, it'll make refinancing much harder and the raising of additional financing more complex. And now CSFB's no longer involved, a bond element looks even more distant.'

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