Boustead buys 30% of PSC-Naval

BOUSTEAD Holdings Bhd yesterday entered into a deal to buy a 30% stake in PSC-Naval Dockyard Sdn Bhd for RM166.5mil, a move that not only salvages the troubled offshore patrol vessel (OPV) project but also addresses a chunk of PSC-Naval Dockyard's non-performing loans (NPLs) held by Boustead's banking arm, Affin Bank Bhd. 

“The rationale for the acquisition is for Boustead to consolidate its investment in PSC-Naval Dockyard by holding a direct 30% interest in PSC-Naval Dockyard. The investment is considered strategic in nature given the OPV contract and the long-term prospects of PSC-Naval Dockyard,'' Boustead said in a statement to Bursa Malaysia. 

The acquisition would be financed with bank borrowings and raise Boustead's debt levels. 

Boustead said that based on the latest available audited financial statements of PSC-Naval Dockyard for the year ended Dec 31, 2004, the net tangible asset was RM272.9mil and the loss after tax was RM423.5mil. 

“Barring unforeseen circumstances, the acquisition is anticipated to contribute positively to the long-term future earnings of the Boustead Group,'' the statement said. 

PSC-Naval Dockyard has an existing OPV project with the Government to design, construct and deliver six OPVs together with integrated logistics support and commercial package programme for the Royal Malaysian Navy. The deal is valued at RM5.35bil. The company also has a contract to build 21 more OPVs for RM24.3bil but the Government has said the decision to continue with this will be made after the first six are delivered. 

The Public Accounts Committee (PAC) has said RM120mil would be needed to salvage the first two vessels, and that the Government also needs to pump in at least RM80mil to pay the local vendors, suppliers and contractors for the OPV project. 

The process to correct the problems with the OPV project has been messy but had started to take place after Boustead managed to put in two of its nominees as directors of PSC Industries Bhd (PSCI). 

The PSC-Naval Dockyard where the patrol vessels are built.

Boustead had recently paid about RM25mil to increase its stake in PSCI to 32.72%. PSC-Naval Dockyard is a 79% subsidiary of PSCI. Lembaga Tabung Angkatan Tentera (LTAT) has a 10% stake in PSC-Naval Dockyard. 

While Boustead's acquisition of the 30% direct interest in PSC-Naval Dockyard solidifies its hold on the company and the prospects of the OPV project proceeding, it also means that the RM400mil owed to Affin Bank would be addressed. 

It is reported that should the RM400mil be recovered, that would reduce Affin Holding's non-performing loans ratio by 2.3 percentage points. Affin Holdings, which owned Affin Bank, has a net NPL ratio of 16%. 

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