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KRISENERGY is planning a preferential offering to raise up to S$140 million to help it ride out the challenging oil and gas sector, which has seen crude oil prices plunged to decade-low levels.
The new senior secured zero coupon notes - due 2024 - will come with up to 1.25 billion free detachable warrants. Each warrant carry the right to subscribe for 1 new KrisEnergy share at the exercise price of S$0.11 each on the basis of 93 notes with 837 warrants for every 1,000 existing KrisEnergy shares.
KrisEnergy is seeking consent to restructure its existing S$130 million 6.25 per cent notes due 2017 and S$200 million 5.75 per cent notes due 2018. It is also seeking to restructure its credit facility with DBS Bank.
Uncertain oil and gas market climate has adversely affected KrisEnergy's traditional strategy of financing investments in projects. It has also " led to increasing pressure on the company's ability to comply with financial maintenance covenants in its various financing arrangements, including the financial covenants in the terms and conditions of the existing notes".
The net proceeds from the proposed preferential offering will be used for capital expenditures relating to existing assets; repayment of the bridge upsize; and general working capital.
KrisEnergy, which has implemented several strategies over the last two years to preserve short-term liquidity, has adopted a new business plan in October to ensure "the long-term stability and sustainability of the group".
The group, which operates three concessions in the Gulf of Thailand, said The Gulf of Thailand is an area of particular expertise for KrisEnergy. It also intends to concentrate on the further development of G10/48, and development of the G6/48 and Cambodia Block A oil fields, all of which are operated by the group, and have multiple low-risk development opportunities with significant exploration upside.
"These developments will be core to the group's strategy to generate cash flow from operations,'' KrisEnergy said, adding that it would retain some high impact exploration prospects, which it does not believe will require significant funding in the next two to three years.
The proposed restructuring will provide it with a "stable and sustainable capital structure, reduced short-term cash debt service obligations and greater liquidity".
"These would then enable the company to deliver on its strategic objectives and preserve, and maximise the value of its assets for all stakeholders,'' it said.
Keppel Corp, which owns 39.9 per cent stake in KrisEnergy through wholly-owned indirect subsidiary Devan International - is in talks with KrisEnergy and plans to "provide an irrevocable undertaking" to vote in favour of KrisEnergy's capital raising exercise, subject to various approvals and conditions.
An extraordinary general meetings of the noteholders of both the 2017 notes and the 2018 notes will be convened.