Abalone company Oceanus Group has struck a deal to restructure its debt and get back on a firmer footing. The mainboard-listed company announced a three-part agreement yesterday with key creditors over an outstanding debt of $81.44 million.
It involves $29.57 million of debt being converted into new shares at 0.395 cent apiece.
Also, $31.87 million of debt will be transferred to a consortium comprising new value investors and the company's management, by way of share conversion.
The remaining $20 million of debt will not be repayable until Dec 31 next year and not accrue any interest from June 30 last year.
The key Oceanus creditors in the deal are BW Investment, Ocean Wonder International and Ocean King Group. Trading in Oceanus shares, which was halted last Friday, resumed yesterday after the announcement.
Market reaction was negative. The stock closed down 28.57 per cent at 0.5 cent.
RHB small-mid caps head Jarick Seet said: "I don't think investors are even thinking about share dilution from the new issuance because it's hard to value this loss-making firm at the moment. More likely, it's a lack of confidence about the future of this company."
Oceanus racked up a 92.1 million yuan (S$19 million) loss in the first nine months of last year after a 114.7 million yuan loss in the same period in 2015.
Chief executive Peter Koh told The Straits Times that the debt restructuring deal will put the company's troubles behind it and signal "exciting times ahead".
"Last year was about cleaning up our books, and we did just that.
"This is an important agreement because the debt would've expired last December," he added.
"Now, instead of insolvency, we are asset-positive, with net tangible assets of around $50 million - that's a big game changer.
"From here on, we can focus on building the company for a turnaround, something I'm confident of.
"We're in the food industry, which is resilient by nature, and we have the biggest land-based abalone farm in our main market China."
Oceanus has been gradually rejigging its business model since early last year.
Instead of growing abalones to maturity - a costly process for its land-based farms - the company is now spawning juveniles and selling them to other farmers.
This helped cut costs by more than 50 per cent last year. Mr Koh said: "We then buy back the adult abalones from the farmers, process and distribute as our products."