Sembcorp Marine has told investors its recapitalisation plans are “vital” and in the “best interests” of shareholders.
The comments from the Singapore yard group come after some shareholders expressed concern about the plan given the poor state of the market.
“If shareholders do not approve the transaction, Sembcorp Marine's strenuous efforts to recapitalise and strengthen its balance sheet will be negated and the critical need to address our liquidity requirements will fail,” the company said in a regulatory filing.
Sembcorp Marine said it will need to re-evaluate other financing options to obtain the critical funding it needs.
“The various capital raising alternatives considered include debt financing, equity-linked debt and equity issuance,” the company said.
“However, the availability, timing and transaction execution risks of the potential alternative sources of funding mentioned are uncertain.”
Last month, Sembcorp Marine and Singapore-listed parent Sembcorp Industries announced a proposed recapitalisation of Sembcorp Marine via an SGD 2.1bn ($1.5bn) renounceable underwritten rights issue.
This would be followed by a proposed demerger that would see Sembcorp Marine spun off into a separate company.
Sembcorp Marine is scheduled to hold a virtual extraordinary general meeting on 11 August to seek shareholders’ approval for both measures.
Temasek a 'strong shareholder'
If the recapitalisation and demerger proceeds, state-backed investment firm Temasek will become a significant shareholder with a stake of more than 30% and potentially up to 58%.
Sembcorp Marine said its sees Temasek as a “strong shareholder” that will “support the group’s strategy and future growth”.
The company added that the banks behinds its current SGD 6bn of loan and trade facilities, including bank guarantees and letters of credit, were “supportive of the transaction”.
With the proposed recapitalisation, Sembcorp Marine expects banks to refinance borrowings and provide additional facilities.
“Without the recapitalisation, we expect banks to refinance existing borrowings but not provide additional financing,” the company added.
Sembcorp Marine management has previously said that the demerger would create a “more focused company” that would be able to “pursue its own strategy with regard to clean-energy solutions”.
Earlier this month, Sembcorp Marine reported a half-year loss of SGD 192m due to the pandemic-related production shutdown at all its Singapore yards from April.
Analysts at UOB Kay Hian recently said Singapore’s shipyards may have to wait another year before offshore newbuilding orders resurface.
“The industry outlook remains challenging and new order flow may only resurface in the first half of 2021, in our base-case scenario,” analyst Adrian Low said.
