Friday 29 Mar 2024
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This article first appeared in The Edge Malaysia Weekly on December 26, 2022 - January 1, 2023

WHILE investors were still cautious on the local oil and gas (O&G) industry early this year, Yinson Holdings Bhd was a bright spot for the sector amid enormous support from minority shareholders for its RM1.19 billion rights issue.

The floating production, storage and offloading (FPSO) vessel operator’s two-for-five renounceable rights issue with free warrants saw a high oversubscription of 22.31%, despite being one of the largest cash calls among listed O&G companies locally.

This was partly on the back of market confidence in a capable management that was able to execute an aggressive growth journey, taking advantage of a strong upswing in the FPSO market.

The rights issue was priced at RM1.41 apiece, representing an attractive discount of 32.2% to its theoretical ex-rights price of RM2.08. In total, 844.21 million rights shares were issued upon its listing on June 28. It was also the largest rights issue across Bursa Malaysia since the pandemic.

The deal, done after a one-for-one bonus issue, was further sweetened by three free detachable warrants with every seven rights shares subscribed, at the exercise price of RM2.29 apiece.

The three-year warrants, expiring on June 21, 2025, were last traded at 46.5 sen apiece on Dec 14. This compared with Yinson’s last traded share price of RM2.48 apiece.

The rights issue has supported Yinson’s continuous growth journey, having fully capitalised on its balance sheet in recent years as it won project after project amid the tight FPSO market.

It is Yinson’s third successful cash call since venturing into the O&G sector. The latest rights issue was over twice the size of its previous one — done more than eight years ago in 2014, which raised RM568.04 million and put the group in a position to deploy four FPSOs then.

This round, out of the RM1.19 billion rights issue proceeds, Yinson allocated RM770 million or 64.7% to fund its FPSO projects.

Another RM320 million (26.9%) was used to repay borrowings, followed by RM44 million (3.7%) for green energy sector expansion and RM55 million (4.6%) for working capital.

With the latest exercise, Yinson was able to fund the equity portion, representing 30% of its US$1.2 billion FPSO Maria Quitéria for its Brazilian client Petrobras. This as Yinson expands its operations to a total of nine floating vessels by 2024 and cements its position as one of the largest FPSO players globally.

Subsequently, Yinson’s net gearing fell to 0.95 times, from 1.15 times prior to the completion, taking into account perpetual securities in the group’s equity portion.

The Lim family, who founded the company and owns a 28.9% stake, also provided the undertaking to subscribe to its entitlement in full, which further garnered investor confidence in the corporate exercise.

AmInvestment Bank Bhd was the principal adviser and managing underwriter for the exercise. It was also a joint underwriter, alongside Maybank Investment Bank Bhd and Kenanga Investment Bank Bhd.

Notable mention

In the electronics manufacturing services (EMS) sector, VS Industry Bhd led the way with its dual-tranche RM500 million sukuk issuance, which is the sector’s first credit to enter the local debt capital market publicly.

The sukuk wakalah, issued by VS Capital Management Sdn Bhd and guaranteed by VS Industry, is part of its RM1 billion Islamic medium-term notes programme (IMTN).

The issuance comprised a three-year, RM200 million sukuk with a coupon rate of 4.28% as well as a five-year RM300 million sukuk, with a coupon rate of 4.74%.

HSBC Amanah Malaysia Bhd was the sole principal adviser, lead arranger, lead manager and shariah adviser for the programme.

According to HSBC, the issuance was well received by investors, with the book growing to a peak of RM1.2 billion on Sept 9 when VS Industry opened its book. “[This] enabled VS Industry to tighten its price guidance while ultimately pricing an upsized trade of RM500 million at a spread of 93bps and 95bps across the three-year and five-year tenors, at an oversubscription rate of 1.85 times,” says HSBC on its submission for best fundraising (non-IPO).

The issuance received a preliminary rating of AAIS-(cg) by MARC Ratings, supported by an established operating track record and strong market position, coupled with a healthy balance sheet due to low-to-moderate leverage and a strong liquidity position.

The issuance was also well-received, despite concerns about forced labour practices that loomed over the industry at the time. For VS Industry, results from the independent review by PwC Consulting, which found no systemic forced labour practices, gave the right signal to prospective subscribers that it was on the right path in this respect.

VS Industry says the proceeds have been earmarked for working capital, capital expenditure, refinancing of borrowings and provision of Islamic intercompany financing within the group.

 

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