Lecca is likely white knight for Barakah

KUCHING: Barakah Offshore Petroleum Bhd may have found a white knight in Singapore’s Lecca Group Ptd Ltd to rescue the company from its financial woes.

Barakah, a Practice Note 17 (PN17) company, has come up with a proposed regularisation plan which, upon completion, will see Lecca Group emerge as Barakah’s single largest shareholder with a 44.87 percent equity interest.
Lecca’s principal activity is investment holding company and ship bunkering.

The pipelay barge will be sold to Lecca Group for US$21 million (RM88 million). Photo: Shiptech Pte Ltd

The proposed regularisation plan comprises share capital reduction of Barakah, disposal of a pipelay barge, share placements and debt settlement that involves a waiver of debt of about RM153.99 million owing to scheme creditors of Barakah and wholly-owned subsidiary PBJV Group Sdn Bhd and issuance of redeemable unsecured loan stocks (RULS), Barakah said in a filing with Bursa Malaysia.

As at May 31, 2019, the total outstanding liabilities due to scheme creditors of Barakah and PBJV amounted to RM106.65 million and RM287.99 million respectively.

The pipelay barge will be sold to Lecca Group for US$21 million (RM88 million). The barge is a flat-bottomed marine vessel fitted with a pipe laying equipment, accommodation for 325 men and with a helideck, and is primarily used for the laying of pipes underwater.

The barge was commissioned for construction by PBJV at a cost of RM286.37 million in 2009 and was completed in September 2012.

Barakah said the consideration for the proposed disposal of the barge owned by KL101 (a Barakah unit) was arrived at on a willing buying-willing seller basis after taking into consideration, among others, the following:

• the historical under-utilisation of the barge since 2016 in respect of its original and intended
purpose of pipe laying;
• the continued lack of immediate visibility with regard to charters for the pipe laying purposes in the near future, taking into account current conditions in the oil & gas industry, and
• the ongoing maintenance upkeep costs for the barge as well as depreciation charges have put a strain on Barakah group’s financials. The proposed disposal will alleviate the cash outflows
of the group.

Under the proposed regularisation plan, Barakah will place out 375 million new ordinary shares to Lecca Group at four sen per share under Tranche 1, together with RM25 million  in nominal value of five year 10 percent redeemable convertible unsecured loan stock at four sen each (RCULS-B) on the basis of five RCULS-B for every three Tranche 1 placement shares .

Lecca Group has the option to subscribe up to 250 million new Barakah shares (Tranche 2 placement shares) at an exercise price of four sen each at any time over a five-year period from the date of the completion of the subscription agreement.

As Lecca Group will emerge as the largest shareholder with a 44.87 percent stake in Barakah, the latter will seek for an exemption for Lecca Group to undertake a mandatory general offer to acquire the remaining Barakah shares that it does not own.
Barakah has proposed debt  settlement involving:
• a waiver of debt of about RM153.99 million owing to scheme creditors of Barakah and PBJV;
• cash payment of RM32  million;
• the issuance of up to RM33 million in nominal value of five year 3 percent redeemable convertible unsecured loan stocks at 100 percent of its nominal value of four sen each (RCULS-A) and
• the issuance of RM69 million in nominal value of five year 5  percent redeemable unsecured loan stocks at 100 percent of its nominal value of RM1 each (RULS) to the scheme creditors.
Besides settling the debts with scheme creditors, Barakah will also utilise the RM88 million
raised from the sale of the pipelay barge as partial repayment of debt owing to Export-Import Bank of Malaysia Bhd (Exim Bank).

KL101 has defaulted on its instalment payment to EXIM Bank. The outstanding amount
is US$2.65 million.

The subscription of Tranche 1 placement shares together with RM25 million in nominal value of RCULS-B is expected to raise gross proceeds of RM40 million. A total of RM32 million of the proceeds will be used to settle PBJV’s debts to scheme creditors,  RM5 million for working capital and RM3 million in expenses related to the proposed regularisation
plan.

Under the proposed share capital reduction, it entails the cancellation of about RM185.51 million
of the issued share capital of Barakah, from RM231.89 million to RM46.38 million.
The exercise will give rise to a credit of about RM185.11 million which will be utilised to set off the company’s accumulated losses.

For financial year ended Dec 31, 2017, Barakah group recorded a loss of about RM216.75 million.
For the 15-month period ended March 31, 2019, the group has incurred net loss of
RM103.54 million.

On the rationale of the proposed regularisation plan, Barakah said it was formulated to address and uplift the PN17 status of the company, with the main objective to return the company to a better financial standing and settlement of scheme creditors, thereby  benefitting all stakeholders.

The proposed regularisation plan is, subject to all approvals from relevant authorities, expected to be completed by first quarter 2020.

Investors seem to have responded positively to Barakah’s proposed regularisation plan as the company shares opened 2.5 sen higher at 8 sen or up by 45 percent from Monday’s close of 5.5 sen. Barakah was Bursa Malaysia’s most actively traded counter yesterday.