Thursday 28 Mar 2024
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This article first appeared in The Edge Financial Daily on November 27, 2019

KUALA LUMPUR: Icon Offshore Bhd has received the nod from shareholders at yesterday’s extraordinary general meeting (EGM) here to proceed with its debt restructuring and cash call proposal, helpful to reduce a debt burden that has affected the offshore support vessel operator’s earnings.

Those who voted for the cash call — to raise up to RM250 million, primarily to reduce Icon’s debt and gearing — include Urusharta Jamaah Sdn Bhd, the group’s second-largest shareholder with an 8.8% stake.

Urusharta Jamaah is a special- purpose vehicle set up by the government to manage Lembaga Tabung Haji’s underperforming assets.

Icon’s 42.3% controlling shareholder, Hallmark Odyssey Sdn Bhd (owned by Ekuiti Nasional Bhd), had given an undertaking to subscribe up to RM183 million of the rights issue. Icon also plans to secure an underwriting of some RM67 million for its rights issue.

“The funds from the rights issue will strengthen the bottom line, with [annual] savings of up to RM31 million in finance and depreciation costs,” recently-appointed Icon managing director (MD) Datuk Seri Hadian Hashim (pic) told reporters after the EGM.

“What my management team and I will do is to improve the delivery. That is what we are doing.”

Icon’s proposal comes in multiple stages. In short, the group proposes to consolidate 50 shares into one, and raise funds of up to RM250 million.

The group has announced a rights issue of 175 shares for every consolidated share held. It works out to a seven-for-two rights issue at six sen per share (before the consolidation). The counter last closed at 4.5 sen apiece, or RM2.25 after the consolidation.

The rights shares come with free eight-year warrants on the basis of one warrant for every four rights shares at an exercise price to be determined later.

With the rights issue, combined with the plan to restructure some RM577.16 million of its debts — last reported at RM619.66 million — Icon will be able to reduce its gearing from 9.16 times to under 1.4 times. Icon is expecting to complete the whole exercise by February 2020.

 

Preserving cash to ride the upside

There are also debts of RM64.2 million (excluding future interest) over five instalment periods with tenures from four to eight years, that can be exchangeable to Icon shares on a staggered basis.

On concerns over a potential dilution, Hadian said shareholders “must look at it from both ways”.

By providing financial institutions with options to subscribe shares in the group instead of repaying debts with cash, Icon is preserving cash if needed, he said.

“In the general scheme of things, the [potential] dilution, compared to what is being [restructured], is for the best,” Hadian mulled.

For the six months ended June 30, 2019, Icon was net-cash positive in terms of operating activities, although cash and bank balances fell to RM32.43 million at the end of the period, from RM43.36 million on June 30, 2018.

The vessel operator is expected to release its financial results for the third quarter ended Sept 30 by the end of this week. It has been loss-making over the last seven quarters.

Hadian pointed to improving prospects for the regional upstream oil and gas markets that will help Icon’s recovery, and ongoing steps to improve its internal processes.

Hours after the EGM, Icon announced its Brunei unit had received a long-term charter extension for the vessel Icon Valiant from November 2019 to end-February 2021, with an option to extend to February 2023.

“I think shareholders are concerned about where the company is going, and we have addressed that issue,” said Hadian.

“We expect our performance to be better next year. The market is picking up. We have seen daily charter rates improving in Malaysia and Brunei for different asset classes.”

Its current order book at RM626.7 million includes RM290 million (inclusive of the extension period) worth of jobs secured this year. Icon also has a tender book of RM240 million currently.

It was reported that Icon’s charter rates had improved 7% to 8% year-on-year over the last few months. Hadian also said the group had posted cost-savings by a similar quantum in the same period.

“But it’s not just about cost-savings. You’ll have to utilise the experience and technical expertise that you have.

“It is about looking at processes, how we’ve done them before — are there better ways of doing things, getting more people engaged — for onshore and offshore processes, now that we think the worst may be over.”

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