Malaysia’s Nam Cheong met with noteholders on Thursday and called upon them to vote for a scheme of arrangement restructuring, as the company affirmed that the proposed scheme would offer significantly higher recovery than a liquidation scenario.
Noteholders were given options to vote for a seven-year base plan, an exit through cash out, immediate share conversion options, or a 50-50 mix of the three options.
The seven-year base plan scheme will be subject to a principal moratorium of three years with principal repayment from year fourth onwards on half-yearly repayment in arrears, yielding total recovery for noteholders at 73.6%.
For the cash out option, Nam Cheong’s major shareholder will subscribe for its entitlement of MYR50m ($11m) worth of rights shares to fund this option, with total recovery for noteholders estimated at 13.5-23%.
For the share conversion option, Nam Cheong will issue new shares at a ratio of $1 to 34 shares and no limit to the shares to be issued, with total recovery for noteholders at 41%.
The shipbuilder is currently sitting on existing inventory and deferred sales of 13 vessels worth around $150m, and faces instalment payments to suppliers and shipyards for 10 additional vessels for a sum of $120m.
The 13-vessel inventory is a result of Nam Cheong’s build-to-stock business model, which turned around to challenge the company amid a severe oversupply of OSVs leading to reduction in demand.
Nam Cheong delivered only two vessels in 2016, compared to 11 vessels in 2015, 24 in 2014 and 20 in 2013. The company sank to a loss of $9.5m in 2016 as against the profit of $6.2m in 2015.
Meanwhile, Nam Cheong announced a proposed disposal of its three office units in Singapore for around SGD25.04m ($18.69m) so as to reduce the group’s current financial liabilities and borrowings in light of the ongoing debt restructuring discussions.
The Suntec Property in Singapore has a 99-year lease with a remaining lease period of approximately 70 years and six months as at 7 September 2017. The offices have been rented out to generate income.
Nam Cheong explained that “although the Suntec Property disposal will be a loss on disposal, the board has considered and resolved that the proposed disposal will be in the commercial interests and benefit to the group as all proceeds from the proposed disposal will be applied towards settlement of outstanding amount under a credit facility granted by DBS Bank Limited and secured by the Suntec Property.”