Sembcorp Marine rights issue undersubscribed; Temasek to mop up 1b shares

THE Sembcorp Marine (SMM) rights issue of shares to recapitalise the company was undersubscribed, with valid acceptances and excess applications received for 9.4 billion rights shares, or 90.2 per cent of the nearly 10.5 billion rights shares available.

According to application results on Monday, SMM's parent company Sembcorp Industries (SCI) subscribed for 7.5 billion or 72 per cent of the available shares by setting off a S$1.5 billion loan it extended to SMM in June 2019. (amendment note)

The muted interest in the rights issue could be due to the fact that SMM shares were trading close to S$0.20 in the last few days before the issue closed. With a negligible difference between the open market and rights prices, there was little incentive for shareholders to take up the rights.

The 1.03 billion unsubscribed rights shares will be mopped up by Startree, as per the sub-underwriting agreement. Startree is a wholly-owned subsidiary of Sembcorp's biggest shareholder Temasek, which will now hold a direct stake in SMM.

SCI and SMM shareholders voted strongly in favour of the S$2.1 billion recapitalisation for SMM and demerger proposal for the two groups in August. In an earlier filing calling for investors to support the recapitalisation, SMM said the funding would help it ride out the industry downturn, strengthen its balance sheet and reposition it for long-term viability.

It also noted that the change of control would affect only a few of its bank facilities, and that the banks are supportive of the transaction. SMM said it would expect the banks to refinance existing borrowings and provide additional facilities if the recapitalisation was successful.

SMM shares closed at S$0.199 on Monday, up 0.2 Singapore cent or 1.02 per cent.

Amendment note: A previous version of this article incorrectly described Sembcorp Industries' loan as being written off instead of set off. The article above has been revised to reflect the correct description.