KUALA LUMPUR, March 12 (Bernama) -- The investment by Malaysia Development Holding Sdn Bhd (MDH) in Sapura Energy Bhd (SEB) will be exclusively used to repay local vendors, without benefitting any existing SEB shareholders or financial creditors, said Permodalan Nasional Bhd (PNB).
As the existing significant shareholder of SEB, PNB said this funding is crucial for the financial survivability of Malaysian service providers within the oil and gas (O&G) ecosystem given that SEB has more than 2,000 vendors, many of which are small ad medium enterprises (SMEs), as well as employ about 59,000 core employees in O&G industry.
PNB pointed out that SEB is a critical service provider for the Malaysian O&G industry and the investment by MDH would support local businesses and maintain the integrity of the supply chain.
It said preserving SEB and the broader O&G ecosystem is essential for the continuity of projects that contribute to national revenue and energy security and this initiative ensures the stability and progress of the entire Malaysian O&G value chain.
"Without SEB and its local vendors, the work will have to be outsourced to foreign and non-Malaysian providers, thus leading payments flowing out of Malaysia. The investment will ensure the country’s oil and gas work will continue to be done by Malaysians, benefitting Malaysia’s gross national income by RM1.1 billion and positively impacting the Malaysian currency exchange rate," said the fund manager.
Apart from that, PNB said the investment is critical in facilitating the completion in one of the largest debt restructuring exercises in Malaysia, involving some of the largest banks.
"The investment will help prevent the liquidation of SEB, which would result in the fire sale of strategic national oil and gas assets, domestically and globally.
"The investment is undertaken in line with global restructuring best practices -- the investment by MDH will take place after SEB’s financial institution creditors agree to a substantial direct haircut as well as indirect haircut due to the loss of value from the conversion of debt to shares at a steep premium," PNB said.
It added that existing SEB shareholders will experience substantial dilution from the conversion of shares under the debt restructuring scheme.
"As part of the restructuring scheme, SEB has undertaken a comprehensive legal and financial due diligence process as well as comprehensive business review by independent experts, including a thorough internal control and risk management review," it said.
PNB also noted that the investment is consistent to what other countries had undertaken to preserve their strategic industry; the investment is similar to what other countries have undertaken to facilitate the restructuring of their critical industry players.
"Examples include the government of Singapore investment in the restructuring of Sembcorp through Temasek as well as the South Korean’s investment in the restructuring of Daewoo Shipbuilding," said PNB.
Other than that, the investment in SEB’s redeemable convertible loan stocks (RCLS) generates fixed profit payment to MDH and is redeemable with the option to enjoy the upside through conversion into shares should SEB’s share price perform in the future.
"The investment by MDH, which will path the way for the completion of SEB’s financial restructuring efforts, will lead to the latter regaining a solid financial footing and recovery.
"The company is committed to repaying this trust by continuing to implement the company’s business and restructuring plans, focusing on long-term value creation and operational resilience as well as play its continued role as a catalyst for local oil and gas services industry," it added.
PNB is also confident that SEB's new management will continue to implement the company’s existing business and restructuring plans, while focusing on long-term value creation and operational resilience.
Yesterday, SEB secured RM1.1 billion in investment from MDH, a special purpose vehicle of the Minister of Finance (Incorporated), through the latter's subscription of the company’s nominal value of RCLS.
-- BERNAMA
