Publication Source: The Edge Markets

KUALA LUMPUR: Sapura Energy Bhd has “successfully” raised about RM4 billion from its rights issue that closed on Jan 16, though the rights issue of new ordinary shares sweetened by free warrants under the exercise was undersubscribed.

The cash call also involved a rights issue of Islamic redeemable convertible preference shares (RCPS-i).

While the first portion to raise about RM3 billion registered a subscription rate of 81.5% — which means an undersubscription of 18.51% — the preference shares to raise some RM1 billion was oversubscribed by 1.18%.

In a statement, Sapura Energy said the remaining unsubscribed rights shares will be fully taken up by the joint underwriters, namely Maybank Investment Bank Bhd (Maybank IB), CIMB Investment Bank Bhd and RHB Investment Bank Bhd.

The three investment banks previously inked an agreement with Sapura Energy to underwrite up to 2.5 billion rights shares that could cost as much as RM750 million. Based on the 30-sen apiece issue price for the rights shares, the underwriters will have to fork out about RM555 million for the unsubscribed shares.

This is based on the 8.14 billion valid acceptances Sapura Energy received for its rights shares for the 9.99 billion rights shares available for subscription. The rights shares will be issued on the basis of five rights shares for every three shares held, with one free warrant given for every 10 rights shares subscribed.

In the weeks leading to the close of the rights issue, Sapura Energy’s share price sank numerous times below the 30 sen apiece issue price for its rights shares, sparking concerns about the cash call and the heightening underwriting risks for the three investment banks.

Yesterday, the stock settled at 28 sen after retreating another 0.5 sen, which gave it a market value of RM1.68 billion. Since the massive cash call was announced on Aug 24 last year, Sapura Energy’s share price has declined near 32% from when it was trading at 41 sen.

As for the RCPS-i, the group received valid acceptances and excess applications of 2.43 billion for the 2.11 billion RCPS-i available for subscription. The preference shares will be issued at 41 sen each, on the basis of two RCPS-i for every five shares held.

On completion of the cash call, Sapura Energy said Permodalan Nasional Bhd (PNB) had emerged as its single largest shareholder with a 40% stake. Sapura Technology Sdn Bhd — which is controlled by president and chief executive officer Tan Sri Shahril Shamsuddin — is now its second largest shareholder with a 16.3% stake after Shahril raised his commitment by RM100 million from RM300 million initially.

PNB, which has been supportive of the cash call, committed RM2.68 billion to the entire exercise after giving an undertaking to subscribe for some of the unsubscribed shares and RCPS-i.

The exercise, the group previously said, is aimed at reducing its borrowings to strengthen its balance sheet, and in turn enable it to bid and undertake higher value projects globally.

It is an important part of the group’s recapitalisation exercise to pare down its huge borrowings of RM14 billion, of which RM4.59 billion are borrowings from Malayan Banking Bhd, Maybank IB’s parent.

Apart from the rights issue, the group also let go of a 50% stake in its exploration and production unit Sapura Upstream Sdn Bhd by forming a joint venture with Austrian integrated oil and gas group OMV Aktiengesellschaft (OMV) to raise cash proceeds of up to US$975 million.

In yesterday’s statement, Sapura Energy said proceeds from both the rights issue and the partnership with OMV will be used to repay the group’s borrowings and boost working capital.

On completion of both exercises, its gearing ratio is expected to drop from 1.74 times to 0.62 time.

“The stronger balance sheet will provide greater financial flexibility for the group to deliver its growth plans. Sapura Energy’s growth strategy continues to see fruition in the increasing number of contract wins.

“The successful rights issue comes amidst the group’s contract wins to-date in financial year ending Jan 31, 2019 (FY19) of RM9.3 billion for its engineering and construction and drilling businesses. The group’s growing order book now stands at RM19.3 billion,” it added.

Its rights shares with warrants and the RCPS-i will be listed and quoted on the main market of Bursa Malaysia on Jan 29.