Oil services provider Dyna-Mac Holdings caused a splash yesterday by announcing plans to pay back $50 million in debt to bondholders earlier than scheduled.
Many firms in the oil and gas sector are struggling with cash flow and looking to extend borrowings amid the protracted crude price slump.
But observers say Dyna-Mac, a potential privatisation target, may be in a strong cash position and not need the funds sitting on its balance sheet, given the quiet sector.
The mainboard-listed company is offering to redeem its $50 million medium-term notes, also known as bonds, due in August next year. It is proposing a call option and an offer to sell the notes, with a coupon rate of 4.25 per cent, for cash.
It is seeking approval from noteholders by an extraordinary resolution to insert a call option as a new condition for the notes.
This will allow the company to redeem all outstanding notes at 99 per cent of their principal amount, together with interest accrued from the last interest-payment date to one day before the redemption date.
If the resolution is passed, the firm may redeem all the notes within 30 days after the date of entry of the second supplemental trust deed.
MARCO POLO MARINE
• Has $50 million worth of notes maturing on Oct 18.
• Appointed KPMG Services to conduct an independent business review of the firm.
• Will meet its noteholders on Sept 13.
• Has been offered a deal of up to US$260.2 million (S$350 million) to refinance all outstanding debt.
• Warned that some of its covenants under existing debt instruments "may come under stress".
"Upon such redemption, the notes will no longer be outstanding and the noteholders will not be entitled to any further payments in respect of the notes," said Dyna-Mac.
Noteholders who vote for the resolution will get a consent fee of 0.1 per cent in principal amount of the notes, subject to factors such as noteholders passing the resolution.
Together with the proposal, Dyna-Mac is inviting noteholders to offer to sell outstanding notes held for cash at a proposed purchase price equal to the principal amount of the notes.
OCBC has been appointed as the dealer-manager of the invitation, which closes at 10am on Sept 28.
Unlike Dyna-Mac, other companies in the embattled sector are hoping to extend their borrowings instead. Marco Polo Marine, which has $50 million worth of notes maturing on Oct 18, has appointed KPMG Services to conduct an independent business review of the firm, and will meet noteholders on Sept 13 to discuss options regarding the notes.
Container ship operator Rickmers Maritime has been offered a deal of up to US$260.2 million (S$350 million) to refinance all of its outstanding debt, while oil and gas producer KrisEnergy has warned that some of its covenants under existing debt instruments "may come under stress".
Dyna-Mac, which is 24.4 per cent owned by Keppel Corporation, did not explain the rationale behind its proposed note redemption. It also did not respond to queries from The Straits Times by press time.
But OCBC Investment Research analyst Low Pei Han said an early redemption can save the firm interest costs on the bonds.
"This especially makes sense if the company does not see much use for the funds sitting on its balance sheet right now," she noted.
While the move also means noteholders will miss out on the coupon payments, Ms Low said it will likely spell relief as the investment is not sunk, given the stresses seen with other bonds in the sector.
Dyna-Mac shares closed 1 per cent lower at 9.6 cents yesterday.