- What are the impact of the new Convening and Restraining Orders on creditors, particularly trade creditors
These new Convening and Restraining Orders will provide Sapura Energy and its 22 subsidiaries (“the Scheme Companies”) with additional time to complete their debt restructuring negotiations. Apart from the extension of time, there is no change to the ongoing exercise with our creditors, including trade creditors.The new Convening and Restraining Orders will provide Sapura Energy time to further advance Corporate Debt Restructuring Committee (“CDRC”) mediated discussions with our financiers, to reach an understanding and in-principle approval on the restructuring of our RM10.3 billion Multi-Currency Financing (“MCF”) Facilities.Our objective is to offer a fair and optimal outcome for all our stakeholders which include, among others, the financiers and the trade creditors (including small and medium Malaysian enterprises).
- Does this mean trade creditors will need to undergo another round of processes under the SOA?
Unless required by the court, trade creditors are not required to undergo another round of processes under the new orders.
- When can we expect the proposed restructuring scheme and court-convened meeting?
The discussions between Sapura Energy and the MCF Financiers, under the purview of the CDRC, are underway and [significant] progress has been achieved to date. Details of the proposed restructuring scheme and the court-convened meeting will be communicated after we obtain in-principal approval from our financiers.
- What is causing the delay in the submission of a proposed restructuring scheme for trade creditors?
The restructuring of the Sapura Energy Group is large and complex, and requires consideration of various stakeholders, in line with the commitment by the Directors and management towards achieving a fair and equitable resolution for all. More time is required to discuss and refine the terms of the proposed restructuring scheme with the financiers, under the mediation of CDRC. It is important to note that with the granting of the Convening and Restraining Orders, the restructuring of Sapura Energy is a court-supervised process.
- How will the new Convening and Restraining Orders impact Sapura Energy’s operations?
The Restraining Order will assist in preventing disruption to ongoing projects by the threat of legal proceedings. The previous Restraining Order had provided space in the last 12 months for us to stabilize operations and implement our Reset plans. As a result, Sapura Energy’s financial performance showed a marked improvement compared to the previous financial year, with all business segments posting positive earnings before interest, taxes, depreciation, and amortization (EBITDA) in the first three quarters of the financial year 2023. (“FY2023”).
We continue to win new work, with contract wins for the year amounting to RM3.4 billion. Our order book as of the third quarter of FY2023, stood at RM6.8 billion, while the Order Book of jointly controlled entities stood at another RM5.7 billion. We have completed a total of 45 projects for clients in FY2023, and eleven of our rigs are currently under contract in Malaysia, Thailand, Brunei and West Africa. Partly due to the Restraining Order, the Group was able to retain its capabilities despite financial drawbacks, improving the prospects of the company. The beneficiaries of this turnaround include our vendors and the entire value chain in which we operate.
1. What did Sapura Energy announce on 10 March?
Sapura Energy announced that the Group and 22 (collectively, the “Applicants”) of its wholly-owned subsidiaries obtained two Orders from the High Court of Malaya at Kuala Lumpur:
- an order to convene meetings with creditors to consider and approve a proposed schemes of arrangement and
- a restraining order to restrain and stay all legal proceedings against the Applicants
2. What is a Scheme of Arrangement?
A scheme of arrangement is a corporate restructuring mechanism provided for under Section 366 of the Companies Act 2016. Under the Court’s order, each company shall convene meetings with its creditors to consider a scheme of arrangement proposed by the company. The scheme of arrangement will state how the company intends to settle its outstanding debts to the creditors.If the scheme of arrangement is approved by a majority of 75% of each class of creditors and final court sanction is granted for such a scheme, the scheme of arrangement will be binding on all creditors of the company.
3. What is the Restraining Order?
The Restraining Order is an order granted by the High Court under Section 368 of the Companies Act 2016.The Restraining Order means any legal proceeding against the company will be halted for a period of 3 months from the date of the Restraining Order.Subject to certain conditions, the company may apply to extend the period of restraint for not more than 9 months.
4. Why did Sapura Energy apply for these Orders?
The Orders were applied for as part of the Sapura Energy group’s proposed debt restructuring plan. Sapura Energy is still facing extreme financial constraints and liquidity issues, making it difficult for us to resolve outstanding payments to creditors. The proposed schemes of arrangement represent the best long-term solution for the Group to address these challenges. The proposed schemes of arrangement, if approved by the creditors and sanctioned by the Court, will enable the Group to carry out its proposed debt restructuring and provide a framework for payment to our creditors.
The Restraining Order enables us to negotiate the proposed schemes of arrangement without the disruption of threatened and ongoing legal proceedings. Ensuring our operations are ongoing means we can continue to deliver our promises to clients and provide work to our vendors.
5. How do I know if the Orders affect me?
The Orders affect creditors who have outstanding claims for services rendered on or before 31 January 2022, with companies listed here. We will formally notify all such creditors through a letter, within one week from the date of the Orders and continue to update creditors, in due course.
6. What happens next?
To kick off the engagement process, we will organize initial briefing sessions with creditors before the end of March 2022. We will formally notify our creditors of the date for these discussions, as soon as we can
7. How long does it take for a vendor to be paid once the SOA is in place?
The schedule will be part of the agreed Schemes of Arrangement, as voted upon by the majority of creditors.
8. What happens to my claims if Sapura Energy goes into liquidation?
The objective of the Proposed Debt Restructuring is to achieve a better outcome for all parties than in a liquidation scenario. The proposed Schemes of Arrangement provide flexibility for each of the Applicant to agree to a commercially viable settlement of its debts with its Creditors. In contrast, in a liquidation, the assets of a company will be liquidated and the proceeds distributed to creditors by a liquidator in strict accordance with the provisions of the Companies Act 2016. The Applicants and the Creditors will have no meaningful control over the liquidation process or the distribution of assets. Additionally, secured creditors will get priority over the assets of the company to satisfy the secured creditors’ debt. After that, any balance will only then be available to the unsecured creditors.
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