This article first appeared in The Edge Malaysia Weekly on January 20, 2020 - January 26, 2020
SCOMI Group Bhd and its Bursa Malaysia-listed subsidiary, Scomi Energy Services Bhd, are back in the spotlight. It is rumoured that two investors who were once touted as the group’s saviours are calling for repayment of their loans.
This has raised questions of whether the top management of Scomi Group and its largest shareholder, IJM Corp Bhd, have clear plans to revive the company, which was flying high during Tun Abdullah Ahmad Badawi’s administration.
Sources close to the two investors — Tan Sri Wan Azmi Wan Hamzah and Datuk Zakhir Siddiqy Sidek — say that when Scomi Group approached them to participate in its corporate restructuring last July, they were convinced the restructuring would go through.
“Six months down the road and the restructuring has yet to happen. There have been no new injections of capital into Scomi Group by the existing major shareholders while Wan Azmi and Zakhir Siddiqy had to foot the bill, lending the group RM42 million to reduce its liabilities. What is happening with the rights issues?” one of the sources The Edge spoke to asks.
To recap, on May 27, 2019, Scomi Group proposed a corporate restructuring and sought to raise a minimum of RM75.6 million via the issuance of up to 1.189 billion rights shares, together with up to 396.3 million warrants, to its existing and entitled shareholders.
IJM, Hong Kong-based Sharp Ascend Ltd (SAL) and Sammy Tse Kwok Fai, CEO of Scomi Group, had given an undertaking to subscribe for their portions of the rights shares. Tse has been Scomi’s CEO since Aug 2, 2018, replacing Shah Hakim Zain.
Scomi Group aimed to raise RM54.6 million from the three shareholders, with IJM subscribing to RM31.6 million. The balance of RM21 million to meet the RM75.6 million minimum capital raising is where Wan Azmi and Zakhir Siddiqy came in — both of them were to underwrite the rights issue.
In a July 18 announcement last year, Scomi Group said it had entered into a loan agreement with Wan Azmi and Zakhir Siddiqy’s Gelombang Global Sdn Bhd for a RM21 million loan to be extended to the group by each investor. The loans were securitised against 435.23 million Scomi Energy shares at 9.65 sen per share. Based on Scomi Energy’s share base of 2.34 billion units, each investor would be getting an 18.6% stake in the group if the loans are not repaid. The loans are due to be repaid six months after drawdown and it is understood they are due soon.
The loan agreement was one of multiple proposals aimed at reducing Scomi Group’s liabilities and improving its capital base, including the reduction of its issued share capital from RM224.96 million to RM3 million and consolidation of every four shares into one.
The multiple proposals involving issuances of shares and warrants were approved by Bursa Malaysia Securities Bhd on Dec 3 last year. Scomi Group owns 1.537 billion shares in Scomi Energy, or a 65.64% stake.
A source tells The Edge that Zakhir Siddiqy met with Scomi Group last Wednesday, as the company wanted to provide some updates on the restructuring of the group. The question is, will Zakhir Siddiqy allow an extension of time for Scomi Group to repay the loan?
“Zakhir Siddiqy’s position is for Scomi Group to repay the loan, as is Wan Azmi’s. However, whether Zakhir Siddiqy will allow an extension is not clear. Both of them do not seem to want to be substantial shareholders in Scomi Energy,” says the source.
Issues plaguing Scomi Energy
Another person familiar with the matter says the reason Wan Azmi and Zakhir Siddiqy are reluctant to take up the Scomi Energy shares they are entitled to is that the group has many issues that need to be resolved. For starters, similar to Scomi Group, Scomi Energy has defaulted on its financing facilities.
On Dec 13 last year, Scomi Energy announced that KMCOB Capital Bhd, its indirect wholly-owned subsidiary, had defaulted on redeeming or repaying Series E of the Guaranteed Serial Bonds issued, amounting to RM55 million.
According to the announcement, KMCOB is short of RM33 million in building up a sinking fund to repay the Series E bond. Despite having received bridging financing from MIDF Amanah Investment Bank Bhd on Dec 10 to repay the bond, it was too late.
That set off other defaults by virtue of cross default provisions, namely for a RM105 million facility with Danajamin Nasional Bhd, RM23.9 million with OCBC Bank (Malaysia) Bhd and a RM2.7 million facility with CIMB Bank Bhd, Labuan.
Scomi Energy has requested an extension of redemption from the bondholders of the Series E KMCOB Bond from Dec 13, 2019 up to Feb 28 this year. The bondholders have until Jan 21 to revert.
Meanwhile, on Oct 31 last year, Messrs KPMG PLT, the company’s independent auditor, expressed a material uncertainty relating to whether Scomi Energy is a going concern.
Scomi Energy is a supplier of drilling fluids and provider of drilling waste management in the oil and gas industry. It also provides coal transport and other marine logistics services.
On March 25 last year, Scomi Energy said its subsidiary, Scomi Oiltools Sdn Bhd, had secured a five-year, US$150 million contract to provide mud products and mud engineering services for deep drilling and development drilling to Kuwait Oil Company.
The company has shown some improvement in the latest reported financial quarter ended Sept 30, 2019, with a net profit of RM3.2 million, compared with a RM1 million profit in the corresponding quarter in 2018. However, currency translation losses of RM18.4 million during the quarter, led to the group reporting a comprehensive loss of RM15.2 million. In the corresponding quarter of 2018, Scomi Energy recorded a comprehensive income of RM23.2 million due to a currency translation gain of RM22.8 million.
Scomi Energy had RM125.4 million in short-term loans while its cash and bank balances stood at RM67.75 million as at Sept 30, 2019. It also had non-current borrowings of RM49.8 million.
Come Monday, when the loans are due, the market will be watching whether Wan Azmi and Zakhir Siddiqy will call for repayment or accept shares in Scomi Energy.
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