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SAPURAKENCANA TMC Sdn Bhd, the wholly-owned subsidiary of SapuraKencana Petroleum Bhd, raised a multicurrency term and revolving syndicated loan facility of up to US$5.5 billion (RM19.32 billion) in March, the largest in Southeast Asia in 2014.

Besides financing the acquisition of Newfield Malaysia Holding Inc’s assets and the company’s working capital requirement and capital expenditure, the deal refinances SapuraKencana’s existing debts and centralises its borrowings under an entity granted with Treasury Management Centre (TMC) status.

In a statement to The Edge, Maybank Investment Bank says the TMC status is granted by the Malaysian Investment Development Authority with the aim of making Malaysia a leading investment and finance hub in Southeast Asia.

“This syndication charts the way for the development of TMC status and caters an alternative to multinational corporations with the status to raise additional funding for their financing or growth requirements,” says Maybank IB.

The facility’s multicurrency structure acts as a natural hedge against the business ventures SapuraKencana engages in, allowing the group to benefit from tax savings and loan stamp duty exemptions. It also provides foreign exchange administration flexibility and enhances the operation efficiency of treasury management.

“The (new loan) facility consolidates SapuraKencana’s existing financing and new funding requirements, harmonising the group’s borrowing terms and conditions, making SapuraKencana a much improved and stronger entity,” Maybank IB says.

“As a consequence of the facility, Sapura-Kencana is able to reduce its overall financing cost and increase its operational and administration efficiency.”

The investment bank acted as the lead coordinating bank, mandated lead arranger, facility agent and security agent of the facility.

As a result of the new facility, SapuraKencana TMC enjoys several tax incentives and foreign exchange administration flexibility, says Maybank IB.

The facility was officially closed on March 18 and announced two days later.

Following the announcement, SapuraKencana’s share price climbed 4% within four market days to RM4.37. According to a TA Securities report, the facility will result in longer-term tenures of SapuraKencana’s borrowings and reduced interest costs.

Since the merger of SapuraCrest Petroleum Bhd and Kencana Petroleum Bhd in 2012, the consolidated group has grown into one of the largest integrated oil and gas service providers in the world, with a market capitalisation of about RM26.2 billion as at financial year ended Jan 31, 2013.

However, the falling crude oil prices have taken a toll on SapuraKencana’s share price, which tumbled 58% to RM2.08 apiece last Tuesday from a peak of RM4.93 on Dec 30, 2013. The group’s market capitalisation stood at RM12.5 billion as at last Tuesday.

SapuraKencana has presence in over 20 countries. In 2013, the group made its foray into the Brazilian oil and gas industry, clinching a

US$4.1 billion contract from Petrobras SA to build, charter and operate six pipe-laying support vessels.

The group is eyeing more overseas contracts in regions such as West Africa and the Gulf of Mexico.

Apart from increasing its geographical reach, the acquisition of Newfield’s hydrocarbon assets in Malaysia has enabled SapuraKencana to diversify and move upstream in the oil and gas industry.

This article first appeared in The Edge Malaysia Weekly, on 22 - 28 December 2014.

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