MDH's RM1.1b Sapura investment to repay local vendors: PNB

The investment by Malaysia Development Holding Sdn Bhd (MDH) in Sapura Energy Bhd will be exclusively used to repay local vendors, without benefitting any existing shareholders or financial creditors, said Permodalan Nasional Bhd (PNB).

As the existing significant shareholder of Sapura, PNB said this funding is crucial for the financial survivability of Malaysian service providers within the oil and gas ecosystem, given that Sapura has more than 2,000 vendors, many of which are small and medium enterprises, and employ about 59,000 core employees in the oil and gas industry.

PNB pointed out that Sapura is a critical service provider for the Malaysian oil and gas industry, and the investment by MDH would support local businesses and maintain the integrity of the supply chain. 

It said that preserving Sapura and the broader oil and gas ecosystem is essential for the continuity of projects that contribute to national revenue and energy security, and this initiative ensures the stability and progress of the entire Malaysian oil and gas value chain.

“Without Sapura and its local vendors, the work will have to be outsourced to foreign and non-Malaysian providers, thus leading payments flowing out of Malaysia. The investment will ensure the country’s oil and gas work will continue to be done by Malaysians, benefitting Malaysia’s gross national income by RM1.1 billion and positively impacting the Malaysian currency exchange rate,” said the fund manager.

Apart from that, PNB said the investment is critical in facilitating the completion of one of the largest debt restructuring exercises in Malaysia, involving some of the largest banks.

“The investment will help prevent the liquidation of Sapura, which would result in the fire sale of strategic national oil and gas assets, domestically and globally.

“The investment is undertaken in line with global restructuring best practices - the investment by MDH will take place after Sapura’s financial institution creditors agree to a substantial direct haircut as well as an indirect haircut due to the loss of value from the conversion of debt to shares at a steep premium,” PNB said.

It added that existing Sapura shareholders will experience substantial dilution from the conversion of shares under the debt restructuring scheme.

“As part of the restructuring scheme, Sapura has undertaken a comprehensive legal and financial due diligence process as well as comprehensive business review by independent experts, including a thorough internal control and risk management review,” it said.

PNB also noted that the investment is consistent with what other countries have undertaken to preserve their strategic industry, and it is similar to what other countries have undertaken to facilitate the restructuring of their critical industry players.

“Examples include the Singapore government’s investment in the restructuring of Sembcorp through Temasek as well as the South Korean’s investment in the restructuring of Daewoo Shipbuilding,” said PNB.

Other than that, the investment in Sapura’s redeemable convertible loan stocks (RCLS) generates fixed profit payment to MDH and is redeemable with the option to enjoy the upside through conversion into shares should Sapura’s share price perform in the future.

“The investment by MDH, which will pave the way for the completion of Sapura’s financial restructuring efforts, will lead to the latter regaining a solid financial footing and recovery.

“The company is committed to repaying this trust by continuing to implement the company’s business and restructuring plans, focusing on long-term value creation and operational resilience as well as play its continued role as a catalyst for local oil and gas services industry,” it added.

PNB is also confident that Sapura’s new management will continue to implement the company’s existing business and restructuring plans while focusing on long-term value creation and operational resilience.

Yesterday, Sapura secured RM1.1 billion in investment from MDH, a special purpose vehicle of the Minister of Finance (Incorporated), through the latter’s subscription of the company’s nominal value of RCLS.

- Bernama

'No bailout here': Fahmi defends govt's RM1.1b Sapura Energy investment

Is there cabinet consensus on Sapura Energy bailout, asks MP

Once critical of bailouts, Anwar throws Sapura Energy RM1.1b lifeline

PNB remains optimistic about M'sian economy, Bursa next year