Fitch affirms ratings of Nakilat bonds

Nakilat Inc. is a Marshall Islands company, wholly-owned by Qatar Gas Transport Company Ltd (QGTC) for the purpose of financing a fleet of liquefied natural gas (LNG) tankers.

The bonds are part of a debt programme to finance 90% of the $7,489m estimated delivered costs of 25 large LNG carriers that are being built in South Korea and that will be chartered to upstream LNG projects in Qatar.

The bond proceeds were on-lent to Nakilat's ship-owning SPVs, each of which guarantees the company's debt. Nakilat is permitted to issue additional debt under the existing finance program to complete the construction of the LNG vessel fleet. Additional senior or subordinated debt will be pari passu with existing senior or subordinated debt, respectively.

The ratings reflect the stable cash flow stream provided by the long-term charter agreements with four LNG projects (the charterers), the strength of the charterers, the high priority position of charter payments in the charterers' cash waterfalls, and the transaction's structure and security package.

The ratings also take into account the importance of the Nakilat ships to the Qatari government, their critical role in delivering gas to offshore markets and the importance of LNG to the Qatari economy.

By 2011, the four LNG ventures, which will rely on Nakilat to transport their gas, are expected to account for 60% of Qatar's LNG production. The ventures are of vital importance to the state, which, together with its international partners, expects to invest approximately $70bn in Qatari LNG facilities by 2010.