Mencast to sell Tuas property at S$13.5m to repay debt

OFFSHORE and marine engineering contractor Mencast Holdings plans to sell its property at 7 Tuas View Circuit for S$13.5 million to repay borrowings as it undergoes debt restructuring, the company announced on late Monday.

Mencast has granted an independent, unnamed Singapore company the option to purchase the property. The option will remain valid until 4pm on April 8.

The company noted that the selling price of S$13.5 million is lower than the property's outright valuation of S$16.3 million, but higher than the forced-sale valuation of S$13 million, and that this is the only offer it has received since it started accepting offers for the property in April last year. The valuations were made by RHT Chestertons as at Jan 23, 2019, and commissioned by United Overseas Bank (UOB), which the property has been mortgaged to.

Mencast expects to receive net proceeds of about S$13.3 million from the proposed disposal after deducting expenses, and to recognise a net gain of about S$5.1 million on disposal. It intends to use these proceeds to repay outstanding bank borrowings obtained from UOB in connection with the property, and to discharge the mortgage. This will help to reduce the group's accrued and future interest payable, it said.

Under terms of the agreement, the purchaser shall pay S$135,000, or 1 per cent of the deal amount upon the grant of the option; another S$675,000 upon exercise of the option, with the remainder payable upon completion of the proposed disposal.

In the event that the option is not exercised by the purchaser, the option fee will be forfeited, and neither party will have any claim against the other, Mencast noted.

The property has a lot area of 8501.20 square metres, and a floor area of 8,685.93 sq m. It is leased from Jurong Town Corporation (JTC) with a tenure of 30 years commencing from Dec 1, 1998, with an option for a further 23-year term from Dec 1, 2028.

The area is currently used by the group to house the operations of subsidiary, Mencast Marine.

Among other things, the deal is subject to in-principle approval from JTC for the proposed disposal and change of use of the property, written confirmation from JTC granting the purchaser the option to renew the leasehold term, as well as shareholders' approval.

In February, Mencast announced that it had reached a debt deal with key creditors, with the principal sums owed to certain lenders suspended until the end of an unspecified restructuring period. The lenders include DBS Bank, Ethoz Capital, RHB Bank, Standard Chartered Bank and UOB.

Once the restructuring period is over, Mencast's working capital will be turned into a 24-month amortising term loan. The group had about S$189.9 million in bank borrowings as at Sept 30, 2018 - most of it secured by its leasehold buildings, vessels, short-term bank deposits, trade receivables and corporate guarantees.

Under the restructuring arrangement, Mencast will cut its debt by S$130 million by selling off properties and other assets. Any proceeds left over after certain loans have been addressed will be subject to a cash sweep - that is, free cash must go towards outstanding debt, and cannot be redistributed to shareholders.

Shares in Mencast last traded at 7.9 Singapore cents apiece on Monday, down 2.5 per cent or 0.2 Singapore cent, before the release of the announcement. The stock did not trade in Tuesday's morning session.