The financing includes a RM126m 3-year term-loan facility for its wholly owned unit BA98/2

by MARK RAO/ pic source: bumiarmada.com

BUMI Armada Bhd has secured up to US$75 million (RM314 million) in financing commitments from Mezzanine Equities NV (MENV) as the share price of the company linked to tycoon T Ananda Krishnan hit levels last seen in November 2018.

The offshore oilfield services provider said the financing includes a US$30 million three-year term loan facility for its wholly owned unit, Bumi Armada 98/2 Holdings Pte Ltd (BA98/2).

The company said a six-year term loan facility of up to US$45 million will also be made available to Armada Floating Gas Storage Malta Ltd (AFGSM).

It is also a wholly owned unit of Bumi Armada, the company noted in an exchange filing yesterday.

MENV which is providing the financing, is wholly owned by Usaha Tegas Sdn Bhd — an indirect major shareholder in Bumi Armada via Objektif Bersatu Sdn Bhd which has a 34.9% stake in the company.

The BA98/2 facility is to fund Bumi Armada’s 30% interest in a jointventure (JV) project with Shapoorji Pallonji Oil & Gas Pte Ltd, which represents the security for the financing.

The JV relates to the charter and operation of a floating production storage and offloading facility (FPSO) to be deployed at NELP Block KG — DWN 98/2 Development Project Cluster-II field located on the east coast of Kakinada, offshore India.

MENV was granted options to acquire Bumi Armada’s 30% stake in the JV at a fair market value to be determined by an independent valuer, which can be exercised at any time within 36 months from the date of grant or until the BA98/2 facility has been fully repaid — whichever is longer.

Bumi Armada is allowed to sell its interest in the JV to any third party during the option period, subject to MENV’s consent. All proceeds arising from a valid exercise of the options must be applied towards repaying the BA98/2 facility.

The Malta-incorporated AFGSM, meanwhile, owns a floating storage unit (Malta FSU) which is currently servicing a long-term charter contract with ElectroGas Malta Ltd, which has a remaining charter period of 16 years. MENV’s US$45 million facility is intended to refinance AFGSM’s existing bridge loan facility of the same amount for the Malta FSU in question.

The facility is expected to require security over certain project assets, including a mortgage over the Malta FSU and an assignment over AFGSM’s rights under the Malta FSU charter contract.

Bumi Armada said the facilities are not expected to materially impact the company’s earnings or its net assets and gearing, based on its latest audited consolidated balance sheet as at Dec 31, 2018.

The company refinanced its unsecured term loans of US$380 million and revolving credit facilities of US$280 million into a single facility back in April 24 this year.

It was trying to slash its corporate debt profile with the cash flow of the group’s main floating production and operations (FPO) business.

The company will also seek out additional value via asset monetisation which will see idle FPO vessels and offshore marine services assets sold if commercially acceptable sale terms are secured.

Earlier this month, Bumi Armada announced that its wholly owned unit Armada Oyo Ltd, inked an agreement to sell its Armada Perdana FPSO for US$40 million to Century Energy Services Ltd.

The company’s total liabilities amounted to RM11.59 billion in the first half of 2019, while its total assets came in at RM14.92 billion over the half-year period.

Investors were positive on Bumi Armada’s total US$660 million refinancing exercise, helping the company’s shares hit a then year-high of 27 sen on April 24 — the same day the refinancing was announced.

The counter has since been testing new highs this month, backed by a strong second quarter showing where the company remained in the black and the improving outlook for the offshore oilfield services provider.

Shares in Bumi Armada last closed at 35 sen, the highest since November, 2018, giving the company a RM2.06 billion market capitalisation.

According to intelligence generated by Bloomberg yesterday, analysts have raised the target price for the company by 25% in the past three months.

But the analyst consensus one-year price target for Bumi Armada is at 30 sen — representing a potential 14.3% downside from the company’s last closing price.

Bloomberg Intelligence also noted that the stock’s relative strength index was above 70, indicating it may be overbought.