Bumi Armada’s refinancing deal fuels price rally on Bursa

Refinancing deal to better reflect its cashflow streams from its core FPO business


Bumi Armada Bhd has refinanced RM2.73 billion worth of short-term debt to better reflect its cashflow streams from its core floating, production and operations (FPO) business.

The cash-strapped company clinched a deal with its lenders to convert its unsecured term loans of US$380 million (RM1.57 billion) and revolving credit facilities of US$280 million into a single facility consisting of Tranche 1 facility of US$260 million and Tranche 2 facility of US$400 million.

“The new facility better aligns the corporate debt profile with the cashflow profile of the group’s main FPO business. The group must now focus on maximising revenue and manage operational costs, as well as find additional value via asset monetisation or other structural improvements,” Bumi Armada CEO Leon Harland noted in a statement yesterday.

The news saw the sector laggard’s share price rally by 35% or seven sen to 27 sen a share on heavy volumes.

Analysts expect the financing agreement will give Bumi Armada the breathing room to bid for fresh jobs without discounting the possibility of the company calling for fresh capital from its shareholders. 

Harland stated that the group intends to monetise idle assets in its offshore marine services (OMS) and FPO vessels businesses for the right price.

He added that the surplus funds from operations and proceeds from asset sales will be used to repay the loans.

The loans will be repayable over two and five years respectively, from the closing date of the facility agreement.

The financing facilities were provided by lenders like Bank of America NA, Bank of America Malaysia Bhd, Export-Import Bank of Malaysia Bhd, The Hongkong and Shanghai Banking Corp Ltd, Oversea- Chinese Banking Corp Ltd, Sumitomo Mitsui Banking Corp, CIMB Bank Bhd and MUFG Bank Ltd via their respective Labuan branches.

Bumi Armada has a challenging financial year in 2018 (FY18), marked by the difficulties encountered with its Armada Kraken floating production storage and offloading vessel and the ongoing low utilisation of its offshore support vessels.

The company posted a net loss of RM2.3 billion for the FY18 which ended on Dec 31, 2018, as opposed to a net profit of RM352 million in FY17.

The company has made impairments in both its FPO and OMS businesses on a prudent basis and has resulted in the substantial loss last year.

Bumi Armada had a RM10.4 billion of total borrowings as at the end of December, according to Bloomberg data.