KUALA LUMPUR (June 7): Cash-strapped Sapura Energy Bhd said the nine-month extension of the restraining orders granted to the group and 22 wholly-owned subsidiaries is necessary to finalise the group's proposed restructuring schemes with its financiers and other creditors to resolve its unsustainable debt and overdue payables.

The group is currently in the process of further refining the restructuring schemes with the aim of reaching an agreement in principle with the financiers on certain key items, said Sapura Energy in a statement on Wednesday (June 7).

This includes reaching an accord on the amount of potential sustainable debt going forward, paring down the outstanding liabilities through the potential divestment of Sapura’s stake in its associate company (SapuraOMV Upstream Sdn Bhd), and options such as the issuance of debt-to-equity financial instruments as one of the methods for resolution.

The nine-month extension of the orders, until March 10 next year, was granted after a hearing at the High Court, The Edge reported on Tuesday. The orders were initially issued on March 8 and set to expire on June 11.

"The orders will enable each of the applicants (Sapura Energy and the 22 subsidiaries) to summon meetings with its creditors, to consider and approve a proposed scheme of arrangement and compromise as part of the company’s group-wide debt restructuring plan.

“The restraining orders will continue to assist the applicants in engaging with creditors without being disrupted by the threat of litigation that could impact the applicants' operations,” said Sapura Energy.

The primary creditors for Sapura Energy Group are the financiers for its multi-currency financing (MCF) facilities. To reduce its unsustainable debt, Sapura Energy and the 22 subsidiaries, who are obligors under the MCF facilities, have engaged with the primary creditors with the help of the Corporate Debt Restructuring Committee (CDRC) to mediate the negotiations.

The proposed restructuring schemes will include a potential financial investment of RM1.8 billion which would further the group’s goal in preserving the industry ecosystem.

Once the proposed scheme is in place, Sapura’s 22 subsidiaries will work towards the court-convened meetings which are expected to be held by the end of October.

In February, the CDRC had extended the standstill period under the CDRC regime for Sapura Energy and its subsidiaries to come to a landing with the MCF financiers for an agreeable debt restructuring solution, until Sept 9.

Meanwhile, Sapura Energy has validated about RM1.5 billion in claims from about 2,000 vendors through its proof of debt exercise involving trade creditors. The adjudication phase is almost complete, with only eight claims still being processed, the group said.

“Whilst we acknowledge the lengthy negotiation process due to the sheer complexity and size of the restructuring, we are quite confident that we are now approaching the last few milestones of this journey,” said Sapura Energy group chief executive officer Datuk Mohd Anuar Taib.

Sapura Energy narrowed its net loss to RM3.30 billion for the fourth quarter ended Jan 31, 2023 (4QFY2023), from RM6.76 billion a year earlier on higher revenue and lower provision for foreseeable losses.

Quarterly revenue more than doubled to RM1.21 billion from RM426.60 million a year ago, primarily driven by a higher percentage of completion of projects for the engineering and construction segment, and higher rig utilisation days for the drilling segment.

For the full year, Sapura Energy recorded a net loss of RM3.20 billion, which was lower than the RM9.05 billion reported for FY2022. Revenue rose 10.9% to RM4.55 billion from RM4.10 billion in FY2022.

"Despite our financial setbacks, Sapura Energy has managed to maintain its capabilities, significantly enhancing the company's prospects. This turnaround will have a positive impact not only on the company, but also our vendors, clients, lenders, and the entire value chain within which we operate," Mohd Anuar said on Wednesday.

Sapura Energy's share price closed unchanged at 40 sen, giving the group a market capitalisation of RM559.27 million.

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High Court gives Sapura Energy and subsidiaries nine-month extension to convening and restraining order