PETALING JAYA: Loss-making Sapura Energy Bhd has appointed restructuring specialist Cosimo Borrelli as its director effective last Friday, just two weeks after it announced its massive debt-restructuring exercise.
Market observers said that aside from its debt restructuring, the oil and gas (O&G) firm is also working on ways to restructure its operations that have been struggling with high operational costs and low-margin contracts.
In a filing with Bursa Malaysia yesterday, the O&G firm said Borrelli, 55, was the leader of the Asia-Pacific and Caribbean restructuring practice of Kroll.
Sapura Energy also noted that Borrelli was a leading restructuring and insolvency practitioner in Asia, having worked exclusively in this area since 1990.
“Borrelli is also well regarded for his work as an independent director to listed companies internationally, especially those undergoing or targeting turnarounds, mergers and acquisitions, divestments and special situations.
“Borrelli’s assignments often have a cross-border focus, including work in Hong Kong, China, Singapore, India, Taiwan, Malaysia, Australia, the United States, the United Kingdom, Europe, Bermuda, the British Virgin Islands, the Cayman Islands and Africa,” the company elaborated.
On March 18, Sapura Energy posted its largest quarterly loss of RM6.61bil for its fourth quarter ended Jan 31, 2022.
Its full-year net loss was RM8.9bil. It had made a RM3.3bil provision for impairment on goodwill, mainly on its drilling assets.
Prior to the results announcement, Sapura Energy announced a 44-page document to restructure its unpaid debts and payables to the tune of RM15bil that would involve banks, vendors and contractors.
The company has been facing several winding-up petitions by some of its vendors over unpaid monies.
However, Sapura Energy managed to secure a restraining order – effective for three months from March 10 – to restrain and suspend legal proceedings against it, while enabling the group and its subsidiaries to engage with its creditors without being disrupted by the threat of litigation.
It was also given a court order to summon meetings with its creditors to consider a proposed scheme of arrangement as part of its debt-restructuring plan.
While Sapura Energy has for some time had a massive order book running into billions of ringgit, analysts pointed out that the group struggled due to its high operational cost and losses from legacy contracts and low-margin projects.
“Sapura Energy blamed its state of affairs on ‘legacy contracts’ that did not factor in Covid-19-related compliance costs, but that is not likely to be the only issue, in our view.
“The company’s misfortunes are probably due to over-optimistic cost estimates, aggressive bid prices in past efforts to win contracts and possible management competency issues,” CGS-CIMB Research said in a recent report.
The debt restructuring entails that for every RM1 debt owned, 25 sen will be refinanced, 20 sen will be converted into perpetual non-tradeable notes that have a 5% coupon per annum.
This perpetual paper is convertible into ordinary shares of Sapura Energy from its fourth year.
The remaining 55 sen will be converted to perpetual non-tradable zero-coupon notes issued by Sapura Energy. These notes will be converted into shares in Sapura Energy’s subsidiaries, namely, Sapura Drilling Sdn Bhd, Sapura Technology Solutions Sdn Bhd and Sapura Geosciences Sdn Bhd, in the fourth year.
It is left to be seen if creditors will accept the proposal, considering it involved a significant haircut for the creditors and vendors. A debt-restructuring expert reckoned that in order for companies like Sapura Energy to sustain their cash flows and operations, a white knight is likely needed to come in with fresh capital.
Source: The Star
