PETALING JAYA: Billionaire T. Ananda Krishnan’s BUMI ARMADA BHD may have averted bankruptcy for the moment via its multi-billion-ringgit debt refinancing, but the loss-making company continues to be highly geared and will incur an additional RM40mil in interest expenses.
Speaking to StarBiz, an equity analyst welcomed the move by the offshore energy facilities and service provider to refinance its unsecured term loans of US$380mil (RM1.57bil) and revolving credit facilities of US$280mil (RM1.16bil), which have been delayed for some time.
However, the debt refinancing is only seen as a stop-gap measure, he said.
The unsecured term loans and revolving credit facilities will be refinanced into a single facility comprising a Tranche 1 facility of US$260mil (RM1.07bil) and Tranche 2 facility of US$400mil (RM1.65bil).
The Tranche 1 and Tranche 2 debt facilities will be repayable over two and five years, respectively, from the closing date of the agreement.
“The debt refinancing is good news because Bumi Armada has escaped liquidation, but this doesn’t change the balance sheet.
“In fact, the new loan facility would incur a higher interest rate, up by 1.5 basis points. With a higher interest expense, the bottom line would be slashed by RM40mil for financial year 2019 (FY19),” he said.
In FY18 ended Dec 31, Bumi Armada recorded a net loss of RM2.3bil on the back of a total revenue of RM2.42bil.
Ananda Krishnan is the controlling shareholder of Bumi Armada, holding a 34.87% stake via Objektif Bersatu Sdn Bhd.
As a result of the corporate debt refinancing exercise, Bumi Armada emerged as Bursa Malaysia’s most active stock yesterday. Its shares rose 35% or seven sen to 27 sen, with a total of 774.51 million shares changing hands.
The stock, which has been slumping for about a year, hit its five-month high yesterday.
A dealer said that the surge in the company’s shares was expected, as the delayed debt refinancing plan was finally achieved yesterday. However, he said investors should consider taking profit from the stock, given the company’s negative outlook.
“The latest news does not change the company’s outlook. I believe it will undertake capital raising exercises in the future to sustain its operations,” he said.
According to Bloomberg data, only two research houses have recommended a ”buy” call on Bumi Armada, while seven brokerages have recommended a “sell” call. Six research houses have “hold” calls.
The 12-month consensus target price, according to Bloomberg, is 18 sen.
Commenting on the refinancing, Bumi Armada executive director and chief executive officer Leon Harland said the new facility better aligned the corporate debt profile with the cash flow profile of the group’s main floating production and operation (FPO) business.
“The group must now focus on maximising its revenue while continuing to manage its operational costs, as well as finding additional value via asset monetisation or other structural improvements.
“As part of this, the offshore marine services’ assets together with certain FPO vessels which are idle will be disposed of, assuming commercially acceptable sale terms can be obtained. Surplus funds from operations and part of the proceeds from certain strategic initiatives including monetisation of assets and new project financing will be used to repay the loans,” he said.