IT has been quiet at Sapura Energy Bhd front this fortnight except for the call by PKR president-cum-Opposition leader Datuk Seri Anwar Ibrahim that his debate with former Prime Minister Datuk Seri Najib Razak on the financially-troubled oil & gas (O&G) outfit  should be open for all media to cover as well as open for viewing by the public.

Earlier on April 2, group CEO Datuk Anuar Mohd Taib told StarBiz that Sapura is not looking for a bailout but instead is finding a viable way to restructure its debt to move forward so that the company has enough cash to pay its vendors.

“We cannot afford to carry RM10.3 bil in debt. We need to restructure,” contended the 30 year O&G veteran who took over the helm from Tan Sri Shahril Shamsuddin on March 23 last year (Anuar officially joined Sapura on Oct 1, 2020).

“Lenders must realise that they will have a working company in us that can continue to do work, especially at this time in the O&G cycle (Brent crude trading above US$100/barrel).”

In so doing, some nine banks which are Sapura’s borrowers may have to bite the bullet by accepting a massive 75% haircut under its proposed restructuring plan. In addition to the nine lenders, the company also owes RM1.5 bil to about 3,000 vendors.

But for now, that sounds more like wishful thinking given the lenders – even as they are supportive of Sapura’s scheme of arrangement – must in Anuar’s words “go through their due process, credit committees, projection of income and others”.

This is where hesitation, rejection, bargaining on the quantum, fire-sale of assets, legal suits and more come to play. After all, the RM10.3 bil sum as bluntly put it by think tank EMIR Research “is more than the combined profits of all banks in Malaysia”.

In fact, the think tank went a step further to highlight the need for policymakers to attach sensibility tests with robust, strictly neutral, technocratic bailout framework to all government-led corporate bailouts.

“Given that Malaysia’s corruption ecosystem is the only well-entrenched and thriving ecosystem we have, the Government bailout moral hazard in our country can have a more explosive metastatic effect over and above any systemic benefits,” opined EMIR Research in a recent opinion editorial entitled “Technocratic Legal Bailout Framework to Arrest ‘Bailoutpreneurship’”.

“Government-led bailouts were found to have lower post-bailout performance reversions than bailouts by other stakeholders (eg large owners or banks), and their announcements generate lower announcement returns than non-government bailout announcements.

“At the same time, politically-connected bailed-out companies exhibit significantly worse financial performance than their non-connected peers at the time of and following the bailout.”

Moreover, EMIR Research observed that bailed-out companies often have a variety of chronic financial problems inflicted by previous management waste, power abuse and reckless decision-making that cannot be salvaged despite an injection of public funds.

Based on EMIR Research’s argument that government-led bailouts are likely to post poor bailout performance, perhaps Sapura should be allowed to pursue its own debt restructuring exercise with the nine financial institutions without any third party intervention (especially the Government) and surely without the involvement of taxpayers’ money.

By so doing, Sapura can prove its worth by being a model government-linked company (GLC) which is able to fight for its business survival without relying on any hand-out whatsoever.

At 3.42pm, Sapura was down 0.5 sen or 12.5% to 3.5 sen with 27.9 million shares traded, thus valuing the company at RM559 mil. – April 26, 2022

https://focusmalaysia.my/should-sapura-be-allowed-to-stand-on-its-own-two-feet-without-bail-out/