Ecopetrol S.A. Commences Cash Tender Offer for Any and All of its Outstanding 4.125% Notes due 2025

Rhea-AI Summary

Ecopetrol S.A. (EC) announced the commencement of a cash tender offer to purchase any and all of its outstanding 4.125% Notes due 2025. The offer is scheduled to expire on January 16, 2024, with the settlement date expected to be January 19, 2024. The Offer is being made in connection with a concurrent offering of notes (the 'New Notes') by the Company. The complete terms and conditions of the Offer are set forth in the Offer to Purchase and in the related Notice of Guaranteed Delivery.

Insights

Financial Analyst

Ecopetrol's cash tender offer for its 4.125% Notes due 2025 represents a strategic financial maneuver aimed at managing the company's debt profile. This action typically occurs when a company seeks to reduce interest expenses or alter the maturity structure of its debt. The tender offer is contingent on the successful issuance of new notes, which suggests a refinancing strategy to take advantage of potentially lower interest rates or different terms that could benefit the company's balance sheet.

From a financial analysis perspective, the key factors to consider include the fixed spread of 0 basis points over the reference U.S. Treasury Security, which indicates the premium over the risk-free rate that investors are receiving. The transaction's success will largely depend on market conditions, investor appetite for the new issuance and the perceived creditworthiness of Ecopetrol. The tender offer could lead to a positive re-rating of Ecopetrol's debt if it results in interest savings or a more favorable debt maturity profile.

However, there are risks involved, such as the possibility that not enough holders will tender their securities, potentially leaving the company with fragmented debt tranches. Additionally, if the new notes carry a higher interest rate or less favorable terms, it could negatively impact Ecopetrol's financials. Investors should closely monitor the uptake of the tender offer and the terms of the new notes issuance to assess the impact on the company's cost of capital and overall financial health.

Market Research Analyst

The tender offer by Ecopetrol is an indicator of the company's proactive approach to capital management and its sensitivity to market conditions. The offer's timing and structure suggest that Ecopetrol is aiming to lock in favorable terms before any potential changes in the interest rate environment. For investors and stakeholders, it is essential to understand the broader market implications of such moves.

Debt buybacks and refinancing can be interpreted as signals of management's confidence in the company's operational performance and liquidity position. A successful tender offer, followed by a new notes offering that is well-received by the market, could enhance investor confidence in Ecopetrol's financial strategy and potentially lead to an improved stock market performance.

Conversely, the market's reception to the new notes will serve as a barometer for Ecopetrol's creditworthiness and investor sentiment towards the oil and gas sector as a whole. As the industry faces challenges such as fluctuating oil prices, energy transition pressures and geopolitical risks, the outcome of this offer could provide insights into the sector's current risk premium and the investment community's outlook on traditional energy companies.

Debt Capital Markets Expert

Ecopetrol's decision to engage in a cash tender offer for its outstanding notes is a significant event in the debt capital markets. The company's strategy to refinance its debt by issuing new notes while repurchasing existing ones is a common practice in corporate treasury management, aimed at optimizing the capital structure or addressing upcoming maturities.

The fixed spread at 0 basis points over the benchmark Treasury yield is a critical element, as it reflects the credit spread investors demand over a risk-free asset. This spread is a measure of the market's perception of Ecopetrol's credit risk. A spread of zero basis points suggests that Ecopetrol's notes are seen as carrying virtually the same risk as the U.S. Treasury Security, which is an exceptionally strong position for a corporate issuer, especially in the volatile energy sector.

The successful execution of this tender offer and the conditions of the concurrent new notes offering will be closely scrutinized by debt investors, as they could influence the pricing and terms of future debt issuances not only for Ecopetrol but also for other players in the industry. The outcome will also reflect the current liquidity and risk appetite in the debt markets, which can be affected by macroeconomic factors such as interest rate trends and economic forecasts.

BOGOTÁ, Colombia, Jan. 9, 2024 /PRNewswire/ -- Ecopetrol S.A. ("Ecopetrol" or the "Company") (NYSE: EC) announced today the commencement of a cash tender offer (the "Offer"), to purchase any and all of its outstanding 4.125% Notes due 2025 (the "Securities"), upon the terms and subject to the conditions set forth in Ecopetrol's Offer to Purchase, dated January 9, 2024 (as the same may be amended or supplemented from time to time, the "Offer to Purchase") and in the related Notice of Guaranteed Delivery (as it may be amended or supplemented from time to time, the "Notice of Guaranteed Delivery"). Capitalized terms used but not defined herein shall have the meanings given to such terms in the Offer to Purchase.

The following table sets forth certain terms of the Offer:

Title of Securities		CUSIP/ISIN Number		Outstanding Principal Amount		Reference U.S. Treasury Security		Bloomberg  Reference  Page		Fixed  Spread  (Basis  Points)
4.125% Notes due 2025		279158 AK5 / US279158A K55		$1,200,000,000		UST 1.125% due January 15, 2025		FIT4		+0 bps

The "Total Consideration" offered for each $1,000 principal amount of Securities validly tendered and accepted for purchase pursuant to the Offer will be calculated in accordance with the formula described in the Offer to Purchase by reference to the Fixed Spread for the Securities over the Reference Yield based on the bid-side price of the Reference U.S. Treasury Security, as calculated by the Dealer Managers (as defined below) at 10:00 a.m., New York City time, on January 16, 2024. Holders whose Securities are accepted for purchase pursuant to the Offer, including Securities tendered by guaranteed delivery, will also receive accrued and unpaid interest on their purchased Securities from the last interest payment date for the Securities to, but excluding, the Settlement Date (as defined below).

The Offer is being made pursuant to the Offer to Purchase, which contains a comprehensive description of the terms of the Offer. The Offer is scheduled to expire at 5:00 p.m., New York City time, on January 16, 2024, unless extended or earlier terminated (the "Expiration Time"). Ecopetrol expects to accept for payment and pay the Total Consideration for Securities validly tendered and not validly withdrawn at or prior to the Expiration Time or delivered by guaranteed delivery prior to 5:00 p.m., New York City time, on January 18, 2024. Upon the terms and subject to the conditions of the Offer, the settlement date is expected to be January 19, 2024 (the "Settlement Date").

Tenders of Securities pursuant to the Offer may be validly withdrawn at or prior to the Expiration Time. If the Offer is extended, tendered Securities may be withdrawn at any time before the 10th business day after commencement of the Offer. Securities subject to the Offer may also be validly withdrawn at any time after the 60th business day after commencement of the Offer if for any reason the Offer has not been consummated within 60 business days after commencement.

The Offer is conditioned upon the satisfaction or waiver by Ecopetrol of certain conditions described in the Offer to Purchase, including the Financing Condition (as defined below), but is not conditioned upon any minimum principal amount of Securities being tendered. Subject to applicable law, Ecopetrol may, at its sole discretion, waive any condition applicable to the Offer and may extend the Offer. Under certain conditions and as more fully described in the Offer to Purchase, Ecopetrol may terminate the Offer before the Expiration Time.

The Offer is being made in connection with a concurrent offering of notes (the "New Notes") by the Company (the "Notes Offering").  The "Financing Condition" means that the Company shall have priced and closed the Notes Offering on terms satisfactory to the Company and resulting in net cash proceeds sufficient to fund the Total Consideration with respect to the Securities validly tendered at or prior to the Expiration Time (regardless of actual amount of Securities tendered), plus accrued and unpaid interest on such Securities from the last interest payment date to, but excluding, the Settlement Date.  The Offer is not an offer to sell or a solicitation of an offer to buy the New Notes.

The complete terms and conditions of the Offer are set forth in the Offer to Purchase and in the related Notice of Guaranteed Delivery, which holders are urged to read carefully before making any decision with respect to the Offer.

The Offer is open to all registered holders of Securities. A beneficial owner of Securities that are held of record by a broker, dealer, commercial bank, trust company, or other nominee (each, a "Custodian") must instruct such Custodian to tender such Securities on the beneficial owner's behalf in a timely manner. Beneficial owners should be aware that a Custodian may establish its own earlier deadline for participation in an Offer.

Global Bondholder Services Corporation is serving as the tender agent and information agent. Requests for documents may be directed to Global Bondholder Services Corporation by telephone at +1 212-430 3774 (banks and brokers) or Toll-Free at +1 855-654-2014.

Copies of the Offer to Purchase and related Notice of Guaranteed Delivery are available at the following web address: at https://gbsc-usa.com/ecopetrol/.

BBVA Securities Inc., BofA Securities, Inc. and Citigroup Global Markets, Inc. are serving as Dealer Managers (the "Dealer Managers") for the Offer. Questions regarding the Offer may also be directed to the Dealer Managers as set forth below:

BBVA Securities Inc. 1345 Avenue of the Americas, 44th Floor New York, New York 10105 United States of America Attn: Liability Management Collect: +1 (212) 728 2446 U.S. Toll Fee: +1 (800) 422 8692 Email: liabilitymanagement@bbva.com

BofA Securities, Inc. One Bryant Park New York, New York 10036 United States of America Attention: Liability Management Group Collect: +1 (646) 855-8998 U.S. Toll Free: (888) 292-0070

Citigroup Global Markets, Inc. 388 Greenwich Street, Trading 4th Floor New York, New York 10013 United States of America Attn: Liability Management Group Collect: +1 (212) 723-6106 U.S. Toll-Free: +1 (800) 558-3745 Email: ny.liabilitymanagement@citi.com

This press release is for informational purposes only and does not constitute an offer to purchase nor the solicitation of an offer to sell any Securities. The Offer is being made only pursuant to the Offer to Purchase and related Notice of Guaranteed Delivery. 

No Recommendation

None of Ecopetrol, BBVA Securities Inc., BofA Securities, Inc., Citigroup Global Markets, Inc., Global Bondholder Services Corporation, or the trustee or security registrar with respect to the Securities, nor any affiliate of any of the foregoing, has made any recommendation as to whether holders should tender or refrain from tendering all or any portion of their Securities in response to the Offer or expressing any opinion as to whether the terms of the Offer are fair to any holder. Holders must make their own decision as to whether to tender any of their Securities and, if so, the purchase price of Securities to tender. Please refer to the Offer to Purchase for a description of the offer terms, conditions, disclaimers and other information applicable to the Offer.

About Ecopetrol

Ecopetrol is the largest company in Colombia and one of the main integrated energy companies in the American continent, with more than 18,000 employees. In Colombia, it is responsible for more than 60% of the hydrocarbon production of most transportation, logistics, and hydrocarbon refining systems, and it holds leading positions in the petrochemicals and gas distribution segments. With the acquisition of 51.4% of ISA's shares, the company participates in energy transmission, the management of real-time systems (XM), and the Barranquilla - Cartagena coastal highway concession. At the international level, Ecopetrol has a stake in strategic basins in the American continent, with Drilling and Exploration operations in the United States (Permian basin and the Gulf of Mexico), Brazil, and Mexico, and, through ISA and its subsidiaries, Ecopetrol holds leading positions in the power transmission business in Brazil, Chile, Peru, and Bolivia, road concessions in Chile, and the telecommunications sector.  

Disclaimer and Other Important Notices

The Company expressly reserves the absolute right, in its sole discretion, from time to time to purchase any Securities that remain outstanding after the Expiration Date through open-market or privately negotiated transactions, one or more additional tender or exchange offers or otherwise, on terms and at prices that may or may not be equal to the consideration offered in the Offer, or to exercise any of its rights, including redemption rights, under the Indenture governing the Securities.

This press release and the Offer to Purchase do not constitute an offer to purchase or the solicitation of an offer to sell Securities in any jurisdiction in which such offer or solicitation would be unlawful. In those jurisdictions where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of Ecopetrol by the Dealer Managers or one or more registered brokers or dealers licensed under the laws of such jurisdiction. If materials relating to the Offer come into a holder's possession, the holder is required by Ecopetrol to inform itself of and to observe all of these restrictions.

The Offer to Purchase has not been filed with or reviewed by the SEC, any state securities commission or any other regulatory authority, nor has any such commission or other regulatory authority passed upon the accuracy or adequacy of the Offer to Purchase or any of the accompanying ancillary documents delivered thereunder. Any representation to the contrary is unlawful and may be a criminal offense.

The Offer to Purchase will not be authorized by the Colombian Superintendency of Finance (Superintendencia Financiera de Colombia or the "SFC" by its acronym in Spanish) and will not be registered under the Colombian National Registry of Securities and Issuers (Registro Nacional de Valores y Emisores) or the Colombian Stock Exchange (Bolsa de Valores de Colombia or the "BVC" by its acronym in Spanish), and, accordingly, the Offer to Purchase may not constitute an offer to persons in Colombia except in circumstances which do not result in a public offering under Colombian law and must be carried out in compliance with Part 4 of Decree 2555 of 2010.

This press release may contain forward-looking statements within the meaning of Section 27A of the United States Securities Act of 1933, as amended, and Section 21E of the United States Securities Exchange Act of 1934, as amended, including those related to the Offer. Forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future, and, accordingly, such results may differ from those expressed in any forward-looking statements. Ecopetrol is not under any obligation to (and expressly disclaims any such obligation to) update forward- looking statements as a result of new information, future events or otherwise, except as required by law.

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SOURCE Ecopetrol S.A.

FAQ

What is the latest announcement from Ecopetrol S.A.?

Ecopetrol S.A. (EC) announced the commencement of a cash tender offer to purchase any and all of its outstanding 4.125% Notes due 2025.

When does the offer expire?

The offer is scheduled to expire at 5:00 p.m., New York City time, on January 16, 2024.

What is the expected settlement date for the offer?

The settlement date is expected to be January 19, 2024.

What is the Offer being made in connection with?

The Offer is being made in connection with a concurrent offering of notes (the 'New Notes') by the Company.

Where can I find the complete terms and conditions of the Offer?

The complete terms and conditions of the Offer are set forth in the Offer to Purchase and in the related Notice of Guaranteed Delivery.