By Emmanuel Samarathisa
ANALYSTS are mixed over Sapura Energy Bhd’s (SEB) move to negotiate its borrowings despite lenders being “supportive” over the matter.
The oil and gas support services provider told The Edge Financial Daily on April 2 that the group expected to complete the refinancing exercise this year. “Banks are supportive (of) the refinancing and we expect to complete the exercise this year,” the company spokesperson told the business daily, but did not elaborate further.
One fund manager, however, raised concerns about the state of the group. “With the current oil price, it’s going to be even tougher for the group to get back on their feet. They were expecting 2021 to break even,” the fund manager said.
The international benchmark Brent crude is currently hovering around US$29.94 (RM130) per barrel.
SEB’s debt charge however is between RM8 bil and RM10 bil. Originally the group had RM17 bil in borrowings but then reduced it to RM10 bil in January last year by using parts of the proceeds from the rights issue of new shares and preference shares.
It was from this exercise that Permodalan Nasional Bhd (PNB) emerged as the group’s majority shareholder. Of this RM10 bil, RM1.6 bil is revolving credits which need not be repaid immediately.
For the remainder RM8.4 bil, RM6.4 bil is to be repaid in the calendar year 2023, while the balance RM2 bil is to be repaid in calendar years 2021, 2022 and 2023. Also, most of the borrowings are denominated in US dollars.
According to CGS-CIMB Securities analyst Raymond Yap in a March 31 note, SEB had not “disclosed” the repayment breakdown for each year.
“While a refinancing of their debt might help them short-term, there are more pressing questions to ask, such as the long-term prospects of the company. From my point of view, the contracts they have taken on, while they might look good on the order book, the margins are not impressive. About 3%-4% margins are not going to be enough for the group.” the fund manager said.
Rakuten Trade vice president Vincent Lau said that the restructuring is a “lifeline” for the group. “They need this to pull them through. The good part is the group is backed by institutional investors such as PNB and they won’t let this sink. So this is a tough time for the group and they may recover, but we are looking at a longer timeline given the current economic conditions, especially with the lower oil price and Covid-19.”
It is understood that SEB will announce its results for the fourth quarter and full year ended Jan 31, 2020, sometime this month.
SEB’s shares closed 5.56% higher at 9.5 sen on April 3. – April 3, 2020
