Billionaire Ananda Krishnan's Bumi Armada down after debt-refinancing


In its report yesterday, CGSCIMB said with the successful debt refinancing exercise, an equity issuance would no longer be necessary, but it noted that BAB still has “a long to-do” list.

In its report yesterday, CGSCIMB said with the successful debt refinancing exercise, an equity issuance would no longer be necessary, but it noted that BAB still has “a long to-do” list.

PETALING JAYA: Bumi Armada Bhd shares were down after investors digested the news that the company has refinanced its debts.

The counter fell 2.5 sen or 9.26% to 24.5 sen by the end of the trading day on a volume of 482.5 million shares.

It had seen a surge in share price by some 30% to 27 sen after opening at 20.5 sen with very strong volumes on Wednesday.

In its report yesterday, CGSCIMB said with the successful debt refinancing exercise, an equity issuance would no longer be necessary, but it noted that BAB still has “a long to-do” list.

The oil and gas company announced earlier this week that it had successfully restructured US$660mil of borrowings that are due almost immediately. They are made up of US$380mil of unsecured term loans and US$280mil of revolving credit facilities with a tranche (US$260mil) to be repaid over two years and another tranche (US$400mil) that will be repaid over five years.

“We congratulate the BAB team for being tough negotiators, as we believe that all of the banks involved would have wanted their money back. Ultimately they were forced to extend the repayment deadlines as BAB’s major shareholders resisted a rights issue,” said CGSCIMB, which upgraded the stock to “hold” from “reduce” or “sell” and a target price of 29 sen.It said that the sum-of-parts valuation of 36 sen remained unchanged but it had factored in a discount of 20% to derive a new target price of 29 sen.

“This discount is applied as interest costs will be much higher post refinancing and BAB continues to face heightened execution risks in terms of the asset monetisation exercise and uncertainty over whether the Armada Kraken can resolve its uptime issues permanently,” it said.

To repay the rest of the principal sum owed, BAB is looking to deploy “surplus funds from operations” and hoped to secure “new project financing” to repay the loans, CGSCIMB said.

“However, we are worried about the potential for continued uptime issues on the Armada Kraken to reduce contractual cashflows, and we remain sceptical as to the banks’ willingness to extend new project financing to BAB.” it said.

UOB Kay Hian (UOBKH), in another report, said that as the loans are to be refinanced to very long tenures, BAB has guided for an incremental interest expense of RM40mil in the financial year 2019 (FY19).

“This also implies a full-year incremental interest expense of RM60mil from FY20 onwards. While we have adjusted our forecasts in tandem, we still require key guidance on detailed action on timeline and earnings plans to fulfill the conditions of the refinanced loans,” UOB Kay Hian said.

“We are still concerned about the group’s long-term ability to repay the loans until it secures material contracts to replenish its subsea vessels,” it added.

UOB Kay Hian retained its “sell” call on BAB but raised its target price to 16 sen from nine sen.

Corporate News , Oil & Gas