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Swiber pursues equity deal with NY-listed Seaspan

Box ship player to inject US$20m for new ordinary shares amounting to an 80% stake, followed by US$180m for preference shares in subsidiary

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Beleaguered Swiber Holdings is pressing on with its bid to resurrect as a power generation business through pursuing a US$200 million equity deal with New York-listed box ship player, Seaspan Corp.

Singapore

BELEAGUERED Swiber Holdings is pressing on with its bid to resurrect as a power generation business through pursuing a US$200 million equity deal with New York-listed box ship player, Seaspan Corp.

Swiber, which has been placed under judicial management for two years, announced the signing of a term sheet with Seaspan on Wednesday, just days after a term sheet involving a share swop arrangement with Australia-based Interlink Power & Energy Holdings expired.

The binding term sheet that it signed with Seaspan on Wednesday called for the newly emerged white knight investor to inject an initial US$20 million in cash for new ordinary shares amounting to an 80 per cent stake of Swiber's enlarged shareholding.

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Seaspan will pump in another US$180 million in exchange of preference shares in Swiber's subsidiary, Equatoriale Energy Pte Ltd. The investment in Equatoriale Energy is subject to Swiber meeting certain milestones relating to the development of a US$1 billion liquefied natural gas (LNG)-to-power project that the Singapore-listed group is eyeing in Vietnam.

The term sheet signed on Wednesday carries an exclusivity period until March 31, 2019. Its long-stop date is June 30, 2019, or the expiry of Swiber's judicial management period, whichever is later.

In the event that Swiber enters into any third-party transactions that result in change of management control in the holding company or certain subsidiaries, it is liable to pay a break fee of US$10 million to Seaspan as well as reimburse reasonable fees and expenses.

The new equity to be injected is not going to repay Swiber's existing debts and liabilities amounting to billions of US dollars. Consequently, the Seaspan deal is conditional on the successful restructuring of Swiber's mounting debt pile. Swiber indicated a preliminary proposal involving its unsecured debts into new company shares and the issuance of redeemable convertible bonds for secured creditors. All in, its unsecured creditors and shareholders are not expected to hold more than 20 per cent of the enlarged equity.

Swiber is expected to convene meetings with its creditors to seek the requisite approvals before the Seaspan-backed equity deal can proceed.

The deal is also primarily premised on Swiber breaking into the LNG-to-power business, beginning with the Vietnam project.

Swiber was likewise pursuing gas-fired power generation opportunities when it last unveiled a deal in late 2017 to buy out Australia-based Interlink through a share swop arrangement.

Swiber is now looking to seal a definitive agreement with Seaspan. But this can only take place with the blessings of its creditors.

Singapore-based lawyer Robson Lee said that for a start, the new equity deal has to first secure the backing from its secured lenders. Mr Lee, a partner with US law firm Gibson Dunn, noted that with the year-end holiday season approaching, Swiber's judicial managers may well require more time to obtain the requisite support from its key creditors.

Additionally, the group is likely to seek extra runway beyond the stipulated deadline of Dec 31, 2018, to call for a creditors meeting and table a statement of proposal. In considering these factors, details of the expected recovery for creditors and shareholding allocation tied to the Seaspan deal may only emerge next year.

Swiber, an erstwhile stock market darling, had previously thrived as an offshore construction play before it ran into financial difficulties amid a severe offshore and marine downturn.

Swiber's stock last traded at 10.9 Singapore cents on July 27 before it headed into a trading halt that turned into a trading suspension.