Moody's rates Delek & Avner notes Baa3

Moody's Investors Service said it assigned proposed Baa3 ratings to the following proposed senior secured notes to be issued by Delek & Avner (Tamar Bond) Ltd.: $400 million notes due 2016, $400 million notes due 2018, $400 million notes due 2020, $400 million notes due 2023 and $400 million notes due 2025. The outlook is stable.

The issuer is a financing vehicle for Delek Drilling LP and Avner Oil Exploration LP (the sponsors), who own an aggregate 31.25% beneficial interest in the Tamar gas field offshore Israel. The sponsors are affiliates of Delek Group Ltd.

The agency said the proposed Baa3 ratings reflect low gas reserves risk, favorable demand dynamics, the strategic importance of Tamar to Israel, a diversified pool of long term gas off-takers and the strong track record of the operator, a subsidiary of Noble Energy Inc.

In Moody's view, these strengths are partly offset by the following weaknesses: flexibility in contracted off-take arrangements from 2019 introduces potential cash flow uncertainty, the agency expects Tamar to face competition from other Israeli gas fields beginning in 2018, the project is located in a region and country exhibiting significant geopolitical risk, the potential for catastrophic loss is greater than in many project financings, there are no covenants binding Noble as the operator and the proposed financing terms include fewer creditor protections than many other rated project financing transactions. Specifically, there are limited creditor step in and remedy rights and a lack of financial ratio covenants.

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