Debt-laden Sapura Energy Bhd received a lifeline in the form of a RM1.1 billion investment from the Minister of Finance (Inc) through its special purpose vehicle Malaysia Development Holding Sdn Bhd (MDH). Is this a bailout, injection, investment or rescue?
Sapura Energy reported that MDH is
subscribing to its redeemable convertible loan stocks worth RM1.1 billion,
subject to certain conditions. The monies are earmarked exclusively for
settling what Sapura Energy owes its vendors. Over 2,000 local vendors are
impacted. Malaysian vendors are predominantly small and medium enterprises
(SMEs) who have endured significant financial hardship during and after the
Covid-19 pandemic.
Source: https://en.wikipedia.org
Permodalan Nasional Bhd (PNB)
president and group chief executive said that the government-linked investment
company, which invested RM2.68 billion in Sapura Energy back in 2018, is
constrained to inject further capital into the company. A single company
investment limit that varies from company to company is the constraint.
In 2018, Sapura Energy undertook a
massive recapitalisation exercise involving rights issue of shares and Islamic
redeemable convertible preference shares (RCPS-i) to raise RM4 billion, which
saw PNB come to its rescue by forking out RM2.68 billion and emerged as a
single largest shareholder with a 44.13% stake. The convertible loan stocks
carry the right to be converted into ordinary shares of the company on
pre-arranged terms and within a limited period.
Sapura Energy, a Practice Note 17
(PN17) company, secured its creditors' approval for its proposed debt
restructuring scheme involving Sapura Energy and its 22 subsidiaries to address
RM10.8 billion is owed to nine lenders of its multi-currency financing
facilities and RM1.5 billion in outstanding trade creditor payments. Following
that, Sapura Energy also obtained the court's approval for the debt
restructuring plan. The funding and court-approved debt restructuring plan form
part of Sapura Energy’s regularisation plan.
Shares of Sapura Energy were
traded at 3.5 sen recently, with a market capitalisation of RM643.2 million.
For the first nine months of FY2025, Sapura Energy posted a net loss of RM342.96 million, compared to a net profit of RM213.18 million a year before, while revenue increased 10.6% to RM3.54 billion from RM3.2 billion. As at end-October 2024, the group’s borrowings stood at RM10.73 billion. Trade and other payables totalled RM5.18 billion, while cash, deposits and bank balances stood at RM1.79 billion. Its accumulated losses increased slightly to RM17.53 billion from RM17.24 billion. The group’s order book currently stands at RM6 billion, while its joint ventures hold an additional RM5.8 billion.
So, is it investment or a bailout with the rakyat’s money? More of the latter. We don’t know the details of the regularisation plan or Sapura Energy’s prospects. If Sapura Energy could be salvaged, why not other Covid impacted companies? To be fair, Sapura Energy was already in trouble pre-Covid. Then we have this astronomical pay package for the former CEO! For bankers, who had lent out RM10.7 billion, they will never learn unless a massive haircut is done! For the vendors, it is a rescue. For the employees, it is stability for their jobs. But what really is the upside? Nothing? MOF is not defending its investment!
I rather give to the poor souls who lost everything in the Putra Heights inferno. Again, that’s for another blog!
Reference:
Sapura Energy gets
RM1.1 bil MOF bailout,
Emir Zainul, The Edge CEO Morning Brief,
11 March 2025.
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