KUALA LUMPUR (March 12): Permodalan Nasional Bhd (PNB) clarified that the RM1.1 billion injection into Sapura Energy Bhd (KL:SAPNRG) by the government is an investment and not a bailout, emphasising that the monies are solely allocated for local vendor payments and are crucial for the survival of local service provider within oil and gas (O&G) industry.

The RM1.1 billion investment was done through a special purpose vehicle of the Minister of Finance (Inc), Malaysia Development Holding Sdn Bhd (MDH).

The investment will see MDH subscribing to redeemable convertible loan stocks (RCLS) worth RM1.1 billion in Sapura Energy, subject to certain conditions, according to the latter's bourse filing on Tuesday.

PNB, which holds a 44.13% stake in Sapura Energy, is not investing more into the O&G outfit as it has a limit to how much it can invest in one specific company, president and group chief executive Datuk Abdul Rahman Ahmad said in an interview in February. The fund invested RM2.68 billion in Sapura Energy's rights issue in 2018. 

In a statement on Wednesday, PNB stated that the investment is exclusively used to repay over Sapura Energy’s 2,000 vendors, many of whom are small and medium enterprises (SMEs), ensuring financial stability within O&G industry. 

The funding also safeguards approximately 59,000 core industry employees while preserving Sapura Energy’s role as a critical service provider, the government-linked investment company said.

Additionally, the investment will help prevent Sapura Energy’s liquidation and the fire sale of strategic national O&G assets, domestically and globally. PNB said that the investment simulates practices done by the government from other countries to preserve their strategic industry, referencing similar government-backed investments in Singapore’s Sembcorp Marine and South Korea’s Daewoo Shipbuilding.

The investment, PNB added, is "in line with global manufacturing best practice". 

"The investment by MDH will take place after Sapura Energy's financial institution creditors agree to a substantial direct haircut as well as indirect haircut due to the loss of value from the conversion of debt to shares at a steep premium. 

"Additionally, existing Sapura Energy shareholders will experience substantial dilution from the conversion of shares under the debt restructuring scheme," it said. 

The subscribed RCLS, it said, will generate fixed profit payments with an option for conversion should Sapura Energy’s share price perform in the future, it added.

PNB also shared that Sapura Energy has conducted a comprehensive legal, financial due diligence process and a comprehensive business review done by independent experts, including a thorough internal control and risk management review, as part of its restructuring process.

“The investment by MDH which will pave the way for the completion of its financial restructuring efforts will lead to Sapura Energy regaining a solid financial footing and recovery,” said PNB.

“The company is committed to repaying this trust by continuing to implement the company’s business and restructuring plans, focusing on long-term value creation and operational resilience as well as play its continued role as a catalyst for the local O&G services industry.

Further, the funding is expected to prevent outsourcing to foreign providers, thereby ensuring that Malaysian O&G work remains within the country, PNB said. The move would also positively impact the national gross income by RM1.1 billion and support the Malaysian currency exchange rate, it added. 

PNB expressed confidence in Sapura Energy’s new management, stating that the company will continue to implement its existing business and restructuring plans, while focusing long-term value creation and operational resilience.

Last month, Sapura Energy, a Practice Note 17 (PN17) company, secured creditors' approval for its proposed debt restructuring scheme involving Sapura Energy and its 22 subsidiaries to address RM10.8 billion owed to nine lenders of its multi-currency financing facilities and RM1.5 billion in outstanding trade creditor payments.

Following that, Sapura Energy also obtained the court's approval last Thursday for the debt restructuring plan.

The funding and court-approved debt restructuring plan form part of Sapura Energy’s regularisation plan, as the company works to exit its PN17 status and reposition itself for long-term growth.

PNB emerged as Sapura Energy's largest shareholder in 2018 after subscribing to its RM4 billion rights issue exercise, which saw PNB forking out RM2.68 billion for ordinary and redeemable convertible preference shares in the company. 

For the first nine months of FY2025, Sapura Energy posted a net loss of RM342.96 million, compared to a net profit of RM213.18 million a year before, while revenue increased 10.6% to RM3.54 billion from RM3.2 billion.

As at end-October 2024, the group’s borrowings stood at RM10.73 billion. Trade and other payables totalled RM5.18 billion, while cash, deposits and bank balances stood at RM1.79 billion. Its accumulated losses increased slightly to RM17.53 billion from RM17.24 billion.

Sapura Energy's shares closed up half a sen or 14.3% to four sen on Wednesday, bringing the group a market capitalisation of RM735 million.

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