A London-based hedge fund group is to offer investors the chance to put their money into the world of offshore oil and gas rigs.
CQS, which specialises in fixed-income and derivatives with about $5bn under management, is launching its first publicly traded, and first long-only, fund on Aim to invest in debt issued to fund the building of offshore oil rigs.
Arbuthnot Securities is acting as nominated adviser and broker to the CQS Rig Finance Fund, which aims to raise £100m through a listing on London’s junior market this December. It will also be dual listed on the Channel Islands Stock Exchange.
The latest offshore exploration rigs, known as 6th generation rigs, are built in Asian shipyards at a cost of $500m and are typically 70 per cent debt-financed. A company set up to build a specific rig, and generally listed on the Norwegian stock exchange, issues secured bonds to finance the three-year construction.
The total market for the type of debt in which CQS Rig Finance will invest is about $4bn.
CQS believes that there is a supply bottleneck in the market, with few shipyards able to build the new, state-of-the-art rigs. While the cost of leasing a rig has trebled over the last five years, the cost of building a rig has not. On completion, they say, a rig’s value tends to be at a premium to the construction costs.
The fund will be managed by Lawrence Tal, formerly at Shell, and Mark Conway, previously a senior convertible bond credit analyst at Credit Suisse. It is targeting a gross yield of 8 per cent a year on a growing capital base.
