To recap, SCI is providing SMM with a 5-year subordinated loan facility of $2 billion to strengthen SMM’s financial position amid the current downturn in the global offshore and marine (O&M) industry.
To fund the loan, SCI will issue $1.5 billion of bonds, with the remaining $500 million funded through its existing available resources and facilities.
SMM will use the bulk of the loan to retire some $1.5 billion of borrowings.
“The board of directors of SCI and SMM believe the proposed financing option is in the best interests of the companies after considering a wide range of options,” says Ho.
“Management will continue to evaluate options to increase liquidity, and at some point a recapitalisation exercise, in our view,” she adds.
DBS is keeping its “buy” calls on both SCI and SMM, with target prices at $3.90 and $2.40 respectively.
“SCI is a safer proxy to O&M recovery with its undervalued utilities business trading at 0.6x P/B while SMM is the pure O&M blue chip name in Singapore,” says Ho.
As at 1pm, shares in SCI are trading flat at $2.41 while shares in SMM are trading 2.0% down at $1.48.
