YINSON HOLDINGS BHD’S RM568 million (US$177 million) renounceable rights issue enabled the group to manage its gearing following a major acquisition, while also allowing shareholders to participate in its long-term growth.

The rights shares, which were listed on June 13, 2014, were oversubscribed by 8.03%. They were priced at RM2.20 each, on the basis of one rights share for every share held, or a discount of 59.4% from Yinson’s theoretical ex-rights price of RM5.42 at the time.

Post-rights issue, Yinson also undertook a shares split exercise in June whereby each share of RM1 par value was split into two shares of 50 sen par each. After adjusting for the split in shares, Yinson’s share price of RM2.47 as at Dec 16 still represented decent gains for those who had subscribed for the rights.

AmInvestment Bank was the principal adviser, joint managing underwriter and joint underwriter of the rights issue, while Kenanga Investment Bank Bhd acted as financial adviser, joint managing underwriter and joint underwriter together with Affin Investment Bank Bhd.

Based on the pro forma effects, Yinson’s gearing ratio would decrease to 0.97 times from 2.47 times following the rights issue. Some RM237 million of the proceeds was to be used for repayment of bank borrowings, and RM263 million to be used as working capital.

To its credit, Yinson’s rights issue provided the shareholders of the oil and gas company an opportunity to participate in the prospects and future growth of the group at a discounted price. Yinson has been aggressively expanding its operations overseas, especially in Vietnam and West Africa.

To recap, Yinson had accumulated debts of RM1.28 billion as at Dec 31, 2013, after the group acquired Fred Olsen Production ASA (FOP), a Norwegian player in the floating production, storage and offloading (FPSO) segment of the oil and gas (O&G) industry, for a total of RM551 million in mid-2013.

The purchase was funded by bank borrowings of RM400 million, share issuance of RM106 million, private placement of RM56 million and internally generated funds of RM14 million. As at Dec 20, 2013, post-finalisation of FOP acquisition, Yinson’s net gearing increased to 2.5 times.

Nevertheless, the gearing level has been brought down with the rights issue, while the acquisition of FOP catapulted Yinson into the world’s sixth largest FPSO owner-operator.

Initially a land-based logistics provider, Yinson extended into providing offshore support services to the O&G industry in 2010. The group made its maiden foray into the O&G industry when it secured a seven-year charter contract with PetroVietnam for a 5,000bhp platform supply vessel.

In October 2014, Yinson’s associated company received three licences from Petroliam Nasional Bhd (Petronas), which allows the group to directly tender for works relating to FPSO and FSO vessels, and mobile offshore production units (MOPU) for Petronas and other O&G companies and operators in Malaysia.

While contracts on the home front seem to be slowing as a result of the drop in oil prices, Yinson is currently bidding for FPSO contracts in West Africa and other Southeast Asian countries.

Yinson recently signed a memorandum of understanding with Golden State Petro to buy a Samsung-built 309,000 deadweight tonne very large crude carrier, Ulriken, which was built in 1998.

The speculation is that the tanker, which is likely to be converted into an FPSO, could be earmarked for the Sankofa-Gye Nyame field offshore Ghana.

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

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