Falcon Energy sells stake in CH Offshore for $20m

A Chuan Hup Offshore support vessel. Falcon Energy had earlier tried to buy out CH Offshore, but Chuan Hup Holdings - its second-largest shareholder then - rejected the offer in January 2015.
A Chuan Hup Offshore support vessel. Falcon Energy had earlier tried to buy out CH Offshore, but Chuan Hup Holdings - its second-largest shareholder then - rejected the offer in January 2015.PHOTO: CH OFFSHORE

Offshore services firm will use proceeds to pay loan instalment

Offshore services firm Falcon Energy Group has offloaded a 21.8 per cent stake in CH Offshore for $20 million.

The stake was sold to SZ Offshore with the deal being completed yesterday, said the firm. Before the sale, Falcon Energy owned 86.74 per cent of CH Offshore - which operates vessels to support the offshore oil and gas industry - through its holding firm Energian. Its holding is now 64.9 per cent.

Falcon Energy said in a statement: "In the light of the current global trend of decreasing oil prices, and CH Offshore's dependency on the oil and gas industry for its revenue, the company considers the sale of CH Offshore to be a strategic decision for the benefit of the group."

It noted that the sale was to meet its "pressing obligation to repay" a CIMB term-loan instalment that is due. It will also give it $4.32 million of working capital.

Falcon Energy added that the move would improve its cash-flow position, and that SZ Offshore was "a serious buyer with the necessary financial resources".

After repaying CIMB $15.67 million, 412 million shares of CH Offshore remain as collateral pledged with the bank, against an outstanding amount of $40.20 million.

Ironically, Falcon Energy had earlier tried to buy out CH Offshore, but Chuan Hup Holdings - its second-largest shareholder at the time - rejected the offer in January 2015. It had offered 49.5 cents in cash for every share it did not already own in December 2014, which was about $247.5 million at the maximum.

Falcon Energy noted yesterday that along with others in the offshore marine, and oil and gas sectors, it is facing "an extremely challenging business environment".

It has bank loans of about US$147 million (S$206 million).

It added: "It is difficult to obtain suitable refinancing of loans on terms favourable to the company in the current economic climate. If the company were to accept unfavourable refinancing terms, its shareholders' interest would be prejudiced."

A version of this article appeared in the print edition of The Straits Times on April 08, 2017, with the headline 'Falcon Energy sells stake in CH Offshore for $20m'. Print Edition | Subscribe