OQ Chemicals Grapples with $1 Billion Debt Refinancing Risk Amid Ownership Uncertainty

OQ Chemicals faces $1 billion refinancing risk as Oman withdraws support, loans drop to 25% discount.

By Mackenzie Crow

4/4, 07:41 EDT
Apollo Global Management, Inc.

Key Takeaway

  • OQ Chemicals faces a $1 billion debt refinancing risk as Oman's OQ SAOC withdraws equity support, causing debt value to drop 25%.
  • Potential ownership change looms for OQ Chemicals after the withdrawal, amidst previous sale considerations and a $3 billion valuation in 2021.
  • Parent company OQ SAOC plans IPOs for two units to raise $1 billion amid market pressures, aiming to diversify Oman's economy.

Debt Refinancing Challenges

OQ Chemicals, a Germany-based chemical manufacturer owned by Oman's state energy company OQ SAOC, is currently facing significant refinancing challenges. The company's $1 billion debt refinancing plan is at risk after its Omani shareholder decided against injecting equity into the business. This decision has led to a notable decrease in the value of OQ Chemicals' debt, with the loans now being quoted at a discount of about 25% to face value. The refinancing was contingent on the company raising up to €300 million ($325 million) through equity and shareholder loans. Despite previous indications of support, OQ SAOC has opted to withdraw from the business, raising concerns over a potential debt restructuring. The loans, which were quoted just below par last week, have seen a significant drop in value, with traders noting a wide spread between bid and ask prices.

Ownership Transition

The decision by OQ SAOC to not proceed with the equity injection has also signaled a potential change in ownership for OQ Chemicals. The company, which was acquired by OQ SAOC in 2013 from private equity investor Advent International, has been under consideration for sale previously, with a valuation of around $3 billion reported in 2021. OQ Chemicals operates production facilities across Europe, the US, and China, and manufactures chemicals used in various applications, including cosmetics, lubricants, printing inks, and flavorings. The current situation has led to discussions about the future direction and financial stability of OQ Chemicals, as it seeks a comprehensive solution that serves the interests of all key stakeholders.

Market Pressures and IPO Plans

In addition to the refinancing and ownership challenges faced by OQ Chemicals, its parent company OQ SAOC is navigating broader market pressures. The company has plans to launch initial public offerings (IPOs) for two of its units, with the goal of raising $1 billion. These IPOs are part of Oman's strategy to diversify its economy and are advised by HSBC Holdings Plc and Morgan Stanley. The initiatives aim to enhance the Muscat Stock Exchange's market capitalization. However, the timing and success of these IPOs are subject to uncertainties related to market conditions, regulatory hurdles, and geopolitical tensions.