Preem Case Study

Topics: Mezzanine capital, Bond, Debt Pages: 3 (1043 words) Published: November 6, 2014
Jing Huang Monday A.M.

Proventus, founded in 1980 by Robert Weil, was an investment firm located in Stockholm, Sweden. It typically invested in companies in need of reform and took a hand in their development. Between the early 1980s and the early 1990s, Proventus carried out almost 70 restructurings. In 2003, Daniel Sachs was appointed as CEO of Proventus. Since 2005, Proventus began to focus increasing on proving development capital to midsize companies through debt investments, such as public corporate companies bonds or leveraged loans, or private corporate loans. In September 2009, Proventus initialed a co-investment vehicle, Proventus Capital Partners (PCP). PCP began to invest in Corral bonds in the summer of 2009. PCP thought the bonds were pretty attractive because the bonds could be refinanced and then paid at par if the refinery market improved and long-term value of holding these bonds were sufficiently high if the market remained weak. By December 2009, it had acquired approximately $7 million in dollar and euro-denominated bonds at around 60% of par.

Preem is the largest oil company in Sweden, accounted for about 80% of Swedish refining capacity and about 30% of Nordic refining capacity. It is a subsidiary of Corral Petroleum AB, which issued €355 million and $350 million floating-rate coupon notes on April 12, 2017. The Bonds paid quarterly interest of EURIBOR+5% and LOBOR+5%, respectively, and both would be due on April 15, 2010. The majority of Preem’s revenues and profits derived from oil refining. PCP felt that refining profitability could be built on two factors: location and complexity. Both Preem refineries, Preemraff Lyseki and Preemraff Gothenburg, had excellent locations and high complexity level. In the long term, PCP thought Preem could generate an average EBITDA of approximately $400 million per year.

In 2008, Preem suffered severely loss due to the sharp decline of oil price, excess capacity, and weak European debt...
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