The oil and gas (O&G) services group said it had received a “formal letter from a white knight” last month indicating it would provide financial support to Sapura Energy, subject to certain conditions, according to a court document sighted by The Edge.
“On Feb 15, 2023, Sapura Energy received a formal letter from a white knight supporting Sapura Energy’s restructuring initiatives to preserve the Malaysian O&G ecosystem.
“The financial support from the white knight will be in the form of investment into Sapura Energy, subject to the following conditions: (1) the amount and terms to be discussed and finalised by the white knight and Sapura Energy; (2) agreement to the schemes with the multi-currency financing (MCF) financiers,” the court filing read.
The white knight, said to be a Middle East oil and gas player, was not named in the court document.
With the new development, Sapura Energy has filed a new proposal to restructure its RM10.3 billion debt owed to nine lenders grouped under financiers of its MCF facilities. The group owes another RM5.12 billion to its vendors.
On March 8, the financially distressed Practice Note 17 (PN17) status company received a much-needed reprieve after it was granted an extension by the High Court to stall legal action by creditors, essentially keeping the wolves at bay.
In its Bursa Malaysia filing, the company announced it and its 22 subsidiaries were given three-month orders from March 11 restraining creditors from commencing or restarting legal proceedings.
This was to allow the group to engage with creditors in their debt restructuring efforts without being distracted by threat of legal proceedings.
On Sept 1 last year, the Corporate Debt Restructuring Committee approved the group’s application for the committee’s assistance to mediate in its debt restructuring negotiations with the MCF financiers.
In a filing with Bursa on March 1, the group said it had a number of meetings with certain of its existing MCF financiers to consider a proposed scheme of arrangement and compromise (PSA) to be approved in due course by the creditors in court-convened meetings.
The company is nearing completion of its proof of debt exercise with its trade creditors in connection with the PSA, the filing added.
The debt restructuring plan
The debt restructuring, facilitated by the advent of the white knight, would see a capital injection of up to RM1.8 billion into the Sapura group through a subscription of redeemable convertible loan stock, according to the court document.
The proceeds will be used to settle outstanding debts owed to the group’s local vendors in the interest of “preserving and protecting the Malaysian O&G ecosystem”, as well as non-Malaysian O&G service providers, as they are vital to the continued operation of the group and its core businesses.
Sapura Energy would also undertake several corporate exercises, including a share capital reduction, the consolidation of its share capital, the issuance of new shares and the issuance of irredeemable convertible unsecured Islamic debt securities (ICUIDS).
The proposed share consolidation would see, among others, 20 Sapura Energy shares converted into one. The company will then issue 500 million shares at RM1 each to its MCF creditors as part settlement of the amount owed.
The group also proposed the issuance of ICUIDS worth RM1.5 billion to its MCF creditors as part settlement of the debt owed.
Sale of assets
It is also considering the sale of some of its assets, including its remaining 50% stake in SapuraOMV for RM2.25 billion, which will be used to pay off some of its debts.
SapuraOMV, which has a portfolio of O&G assets, is a strategic partnership between Sapura Energy and OMV Exploration & Production GmbH, a subsidiary of Austria’s OMV Aktiengesellschaft.
Sapura Energy said it would be able to settle about RM4.75 billion of its borrowings within seven years through asset disposals and cash proceeds generated from existing and new contracts.
Permodalan Nasional Bhd is the single largest shareholder of the group with a 28.26% stake, or 4.5 billion shares.
The news about the white knight broke after the market closed today. Whether investors will be enthusiastic about the development remains to be seen.
Sapura closed at 4.5 sen, up 12.5% year-to-date, giving the group a market capitalisation of RM647.15 million.