PNB, the existing significant shareholder of Sapura Energy, said the funds invested would be exclusively and directly used to repay the oil and gas (O&G) firm’s local vendors.
It said this was crucial to ensure the financial survival of Malaysian service providers within the O&G ecosystem, pointing out that Sapura Energy had more than 2,000 vendors.
Many of these vendors were small and medium-sized enterprises and made up about 59,000 workers in the O&G sector, it added.
The asset manager also said MDH’s investment was needed to preserve the Malaysian O&G industry, given that Sapura Energy was a critical service provider in the sector.
“The investment supports local businesses and maintains the integrity of the supply chain. Preserving Sapura Energy and the broader oil and gas ecosystem is essential for the continuity of projects that contribute to national revenue and energy security.
“This initiative ensures the stability and progress of the entire Malaysian O&G value chain,” it said in a statement.
PNB said the RM1.1 billion investment would also catalyse economic growth, pointing out that failing to pay local vendors meant the work would be outsourced to foreign firms.
“The investment will ensure the country’s O&G work will continue to be done by Malaysians, benefitting the national income by RM1.1 billion and positively impacting Malaysian currency exchange rate.”
It said the RM1.1 billion would also facilitate the completion of one of Malaysia’s largest debt restructuring exercises, preventing Sapura Energy’s liquidation and the subsequent fire sale of strategic O&G assets domestically and globally.
In a Bursa filing yesterday, Sapura Energy said the finance ministry, via its special purpose vehicle MDH, would be subscribing to its redeemable convertible loan stocks worth RM1.1 billion.
The government’s decision to inject the funds drew accusations that it had bailed out Sapura Energy, a practice which Pakatan Harapan leaders had condemned when it was in the opposition.
Sapura Energy’s financial trouble started in the mid-2010s due to falling oil prices, leading to annual losses and mounting debt.
In 2023, external auditors Ernst & Young flagged concerns over Sapura Energy’s ability to continue operating. Last month, the company secured creditor approval for a debt restructuring plan, which was cleared by the court last Thursday.
PNB maintained that MDH’s investment was in line with global restructuring best practices.
“The investment by MDH will take place after Sapura Energy’s financial institution creditors agree to a substantial direct haircut as well as indirect haircut due to the loss of value from the conversion of debt to shares at a steep premium.
“Additionally, existing Sapura Energy shareholders will experience substantial dilution from the conversion of shares under the debt restructuring scheme,” it said.
It also said Sapura Energy had done comprehensive legal and financial due diligence, as well as a comprehensive business review through independent experts.
PNB added that the RM1.1 billion investment was in line with what other nations had done to preserve their strategic industries, including Singapore’s restructuring of Sembcorp through Temasek and Korea’s restructuring of Daewoo Shipbuilding.
Lastly, it said, MDH’s investment was repayable as redeemable convertible loan stocks would generate fixed profit payment to the firm.
“This is redeemable with the option to enjoy the upside through conversion into shares should Sapura Energy’s share price perform in the future.”
PNB expressed confidence that Sapura Energy’s new management would continue carrying out its business and restructuring plans while creating long-term value and operational resilience.
It added that MDH’s investment would pave the way for Sapura Energy to regain strong financial standing and recovery.
“The company is committed to repaying this trust by continuing to implement the company’s business and restructuring plans, focussing on long-term value creation and operational resilience as well as play its continued role as a catalyst for the local O&G services industry.” - FMT
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