KUALA LUMPUR (March 25): Malaysian billionaire T. Ananda Krishnan’s Bumi Armada Bhd is nearing an agreement for a loan of around US$500 million, people with knowledge of the matter said, in a deal that will give the embattled energy firm more time to restructure.
Banks are finalizing details of a five-year credit facility, according to the people, who asked not to be identified because the information is private. The funds will be used to refinance existing debt that matures in May and for working capital, one of the people said.
Bumi Armada swung to a loss last year as lower crude prices hurt demand for its offshore oilfield services, making it more difficult for the company to pay back its debt. The company had RM10.4 billion (US$2.5 billion) of total borrowings at the end of December, data compiled by Bloomberg show.
The loan would give Bumi Armada breathing room to sell assets and restructure its business in a bid to return to profitability, one of the people said. The company is expected to sign the loan agreement with lenders as soon as the next few weeks, the people said.
Shares of Bumi Armada rose as much as 5.4% in Monday morning trading. They were up 2.7% to 19 sen at the mid-day break in Kuala Lumpur, on track for the biggest gain in a week.
“The company has stated that it is working with the lenders and aims to have a refinancing of the corporate debt in place by the end of April,” a representative for Bumi Armada said, declining to comment further. “That remains the current position.”
Local brokerage JF Apex Securities Bhd. cut its recommendation on the stock this month to “hold,” from “buy,” over concerns about its debt refinancing as well as execution risks and lower crude oil prices. It’s also recently been downgraded by CIMB Group Holdings Bhd and Macquarie Group Ltd.
Shares of Bumi Armada tanked 80% last year, while the benchmark FTSE Bursa Malaysia KLCI Index declined 5.9%. The company reported a net loss of RM2.3 billion in 2018, compared with a net income of RM352.2 million a year earlier.
Bumi Armada had RM1.58 billion of unsecured short-term term loans at the end of last year, and is in discussions with lenders about refinancing the debt with long-term borrowings, according to a February exchange filing. The company is planning to sell assets, optimize its cost structure and pursue collections from customers to strengthen its cash flow, the filing showed.
Krishnan is Malaysia’s fifth-richest person with a net worth of about US$4.5 billion, according to the Bloomberg Billionaires Index.