Petroleum Export sets talk for $1.559 billion three-class issue of senior secured notes

By Reshmi Basu

New York, July 13 - Petroleum Export Ltd. set price talk for its three-tranche offering of $1.559 billion in senior secured notes, according to a market source. The deal is expected to price Thursday or Friday.

The deal is comprised of three classes: $400 million of class A1 notes (Aaa/AAA), $250 million of class A2 notes (Aaa/AAA) and $909 million of class A3 notes (Baa1/BBB).

The class A1 and class A2 notes will carry an average life of 2.8 years and a maturity of 4.9 years. The class A3 notes will carry an average life of 3.9 years and a maturity of 5.9 years.

Price talk on both the class A1 and class A2 notes due June 15, 2010 is 75 basis points more than Treasuries. Meanwhile talk on the class A3 notes due June 15, 2011 is 137.5 basis points to 150 basis points more than Treasuries.

The deal will be structured as the monetization of prepaid forward sales between Egyptian General Petroleum Corp. and Morgan Stanley Capital Group.

Petroleum Export, a Cayman Islands special-purpose vehicle, will enter an agreement with Morgan Stanley Capital for the length of the transaction. Each month, Morgan Stanley Capital will pay a preset price for the delivery of crude and naphtha from Petroleum Export. The amount paid by Morgan Stanley Capital will be enough to pay debt service on the notes.

Parent company Morgan Stanley will guarantee obligations under the purchase agreement.

MBIA Insurance Corp. will guarantee the class A1 notes and XL Capital Assurance Inc. will guarantee the class A2 notes.

Morgan Stanley is the global coordinator for the Rule 144A/Regulation S offering. BNP Paribas and Merrill Lynch are joint bookrunners.

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