Bumi Armada Completes Mega USD 880 million IPO

The jittery market environment might have forced the withdrawal of several IPOs around the world in the recent weeks, but Bumi Armada’s successful equity raising has shown that there is still strong investor appetite for companies with exciting long term prospects. The Malaysian oil and gas services company and its existing shareholders raised RM 2.66 billion (USD 879 million) this week, making the offering the second largest in Southeast Asia this year after  Hutchison Port Holdings Trust. For further details, see the Guts of the Deal below.

According to the local media, the total demand for the institutional offering far exceeded supply by 40 times, resulting in the shares being priced at the upper half of its indicative price range at RM 3.03 (USD 1) a piece, or 19 times the company’s earnings in 2010. The retail tranche (excluding the employee offering of 21 million shares) was also oversubscribed by 9.5 times, which suggests that investors remain optimistic on the outlook of the oil and gas sector. Taking into account that 26.7% of the deal was actually made up secondary shares sold by existing shareholders, the company filled its coffers by a lesser amount of RM 1.852 billion (USD 612.7 million), that will go towards the repayment of existing bank debt and fund capital expenditure and working capital requirements. RM 775 million (USD 256 million) has been earmarked to repay unsecured revolving credits and bridging loans within six months, which this will provide the company interest savings of RM 24 million and a lower gearing ratio from 2.75 to below 1.  Continue Reading

Bumi Armada Subsidiary Finds Domestic Support

Armada Marine Contractors Caspian has inked a USD 238 milion eight year term loan with six domestic financial institutions in Malaysia. The loan is guaranteed by Bumi Armanda, Malaysia’s largest owner and operator of offshore vessels. Mandated lead arrangers include OCBC Bank (Malaysia), RHB Investment Bank, CIMB Investment Bank, Malayan Banking, AmInvestment Bank and Al-Rajhi Banking & Investment Corp (Malaysia).

Last August, Bumi Armada found similar success with its FPSO (floating, production, storage and offloading vessel) project financing despite the challenging market conditions. The company secured a five year USD 190 million limited recourse loan facility with 7 lenders, comprising Sumitomo Mitsui Banking Corporation (“SMBC”), Bance UBAE S.P.a,  Australian and New Zealand Banking Group, ABN AMRO Bank, WestLB, Malayan Banking and Standard Chartered Bank. The funding commitments were scaled back from an initial USD 260 million but an interesting aspect was that SACE, the Italian Export Credit Agency (“ECA”) provided guarantee for the USD 100 million ECA tranche. SMBC acted as structuring bank, documentation bank and SACE coordinator in this transaction.

The Importance of Self Preservation

In 2009, the equity markets had a roller coaster run, but some shipping companies found windows of opportunity for share placements, often tied to debt reduction. Self help through raising equity capital for balance sheet recapitalization is one way to ride through the difficult times. There had been varying degrees of success and among the most notable would be Neptune Oriental Lines’ (“NOL”) USD 972 million rights issue in June and NYK’s recently concluded JPY 116.4 billion (USD 1.3 billion) global equity offering. Continue Reading

MISC Wants it Right

With the strong support from state-owned oil and gas company Petroliam Nasional Berhad (“Petronas”), MISC has announced last week that it plans to raise up to RM 5.2 billion (USD 1.5 billion) via a renounceable rights issue. Petronas, which currently owns 62.67% of MISC, has agreed to subscribe its entitlement in full in proportion to its shareholdings and will take up additional rights shares, should these shares remained unsubscribed by other entitled shareholders.

744 million new ordinary rights issues which represent 16.7% of the enlarged share capital will be sold to existing shareholders on the basis of one rights share for every five existing ordinary MISC shares at an issue price of RM 7.00 a piece. The issue price is a discount of approximately 18% from the theoretical ex-rights price of RM 8.53 based in the 5-day volume weighted average market price of MISC shares up to an inclusive of 20 November 2009. The rights shares will rank pari-passu with all existing MISC shares.

Proceeds will be used for capital expenditure to partially finance projects for floating production systems. MISC says the proposed rights issue will allow the company to raise new capital without diluting existing shareholders’ shareholdings and at the same time lower its debt-equity ratio from 0.57 to 0.45. MISC has currently total borrowings of RM 11.8 billion (USD 3.5 billion).

The offering managed by sole advisor RHB Investment Bank is expected to be closed by the first quarter of 2010.