SINGAPORE (THE BUSINESS TIMES) - Keppel associate company Floatel has obtained a US$100 million (S$134.4 million) super senior revolving credit facility from a Temasek portfolio company, as part of a consensual transaction that will no longer involve an acquisition by a newly established orphan company.
The consensual transaction will now take place at Floatel itself. The troubled offshore vessel company will continue to own all its subsidiaries involved in the initial deal, including those which own and operate vessels Floatel Reliance, Floatel Superior, Floatel Triumph, Floatel Victory and Floatel Endurance.
Keppel unit Fels Offshore will also retain its 49.92 per cent stake in Floatel and forgive a US$244 million subordinated loan borrowed by Floatel.
Floatel's 9 per cent senior secured first-lien (1L) bonds will be converted into US$230 million worth of new Floatel-issued bonds and common shares representing 40.08 per cent of Floatel's share capital.
The new 1L bonds are split into US$115 million worth of senior secured 1L cash pay bonds and US$115 million worth of 1L payment-in-kind (PIK) pay bonds, with a coupon rate of 6 per cent and 10 per cent per annum respectively.
The US$100 million revolving credit facility obtained from Temasek portfolio company Clifford Capital will help fund a cash redemption of these new 1L bonds and for Floatel group's working capital and general corporate purposes.
When the consensual transaction is completed, Floatel will make a US$15 million cash redemption of the new cash pay 1L bonds. It will also make a US$15 million cash redemption of the new PIK pay bonds.
Meanwhile, Floatel's 12.75 per cent second-lien (2L) bonds will be converted into warrants with a 10-year term, which convert into 12 per cent of the post-conversion equity in Floatel. This is with a strike price based on an equity value of US$424 million.
The super senior revolving credit facility and new 1L bonds are secured against the five mentioned Floatel vessels, as well as other assets related to these vessels. These include, without limitation, ship mortgages over the vessels, share pledges in respect of various subsidiaries and floating charges. The common security also secures certain Floatel hedging facilities up to US$10 million.
Keppel Offshore & Marine (Keppel O&M) has entered into a participation agreement with Clifford Capital, which may require Keppel O&M to make Clifford whole for any loss the latter suffers under the super senior revolving credit facility.
The super senior revolving credit facility and consequently, Keppel O&M's economic exposure, benefit from the common security, Keppel Corp said.
The consensual transaction is not expected to result in any impairment to Keppel Corp's carrying value of Floatel, which is about S$96 million. This is based on Keppel's financial adviser's current analysis of Floatel's group assets and operations.
The group said the valuation of the investment will be assessed at the end of each financial reporting period. It expects the consensual transaction to complete on March 24.
Shares of Keppel Corp were trading 0.6 per cent or $0.03 higher at $5.18 as at 9.21am on Monday (March 22).