By Tan Hwee Hwee
SINGAPORE - Nine prominent business people have pooled together S$60 million in rescue financing for listed offshore and marine (O&M) group Marco Polo Marine.
The founders behind Super Group, Soilbuild, Goldbell, Yanlord were named in association with the equity injection deal. Oxley Holdings deputy chief executive Low See Ching and Singapore-listed Vibrant Group and Penguin International have also thrown their hats into the ring.
Some, if not all of those named, are business acquaintances of Marco Polo Marine chief executive Sean Lee.
Even so, it has taken Mr Lee eight months and meetings with over 100 investors to finally stitch up these deals.
Not helping is the multi-year downturn inflicting the oil and gas related O&M sector. "A lot of investors walked away when they heard it's oil and gas," he said.
But the Lee family persevered and took the lead in swallowing the pill to make way for new investors. They will dilute their equity, which now stands at a controlling stake of 62 per cent, to just 6 per cent. Over two billion new shares valued at S$0.028 will be issued to these nine named investors.
Mr Lee said this was a clear sign of his family's commitment to turn the company around. One source also noted that the equity deals carry very low risk for incoming investors, considering that as a pre-condition, the group liabilities have to be pared down to not more than S$12 million.
Those in the sector would have been in a better position to recognise values in such deals. Yet, Mr Lee had to mainly bet on potential investors outside the sector because practically almost everyone exposed to O&M has been hit by the prolonged downturn.
As such, Marco Polo's nine new equity investors are mostly associated with non-O&M sectors - Super Group for its instant beverage fame, Soilbuild for construction, Yanlord for its real estate footprint in China.
That said, Mr Lee has managed to rope in Penguin International, a crew boat-focused owner-operator and builder. He noted how these two businesses are complementary - Marco Polo's steel boats and Penguin's aluminium craft would complete the offering for charterers.
Before the new equity can come in, Marco Polo has to deal with the telling damages sustained in this downturn.
The group slipped into negative equity net of liabilities of S$150.8 million after taking in total impairment and allowances of S$299.3 million.
It has also run up S$258 million of debts in all compared to the S$60 million to be injected as new equity, so it badly needs to deleverage if it wants a decent chance of riding to the next upswing projected from 2019, at the earliest.
Of these, S$202 million are bank loans on the books of Marco Polo's subsidiaries that are guaranteed by the listed holding company. Another S$50 million pertain to the holding company's Singdollar medium-term notes issuance.
The group has sought debt restructuring under two schemes of arrangement in Singapore for the holding company and its key shipyard subsidiary, and for its Batam-based unit under Indonesia's Penundaan Kewajiban Pembayaran Utang (PKPU) regime.
The proposals tabled for the group of companies are pleading for 69 per cent, 71 per cent and 95 per cent debt forgiveness from its bank lenders, noteholders and for its contingent liabilities, respectively.
They also offered a part-settlement of these liabilities with an equity swap. New stock will be issued to these stakeholders at S$0.035 per share.
In addition, trade debts will be termed out by three more years.
The group has six senior lenders - UOB Bank, DBS Bank, OCBC Bank, CIMB, Sumitomo Mitsui Finance & Leasing and Caterpillar Financial Services. UOB is the largest senior lender accounting for over S$90 million of the group's bank loans.
Mr Lee described the noteholders as mostly institutional investors and they include two business units of UOB and DBS.
For the existing shareholders who also face dilution, Marco Polo is proposing to issue over 269 million free warrants, each carrying the right to subscribe for one share at the exercise price of S$0.035.
The group intends to hold an extraordinary general meeting in December to table the restructuring plan for shareholders' approval.
Marco Polo last traded at S$0.059 before trading suspension.