Sembcorp Industries‘ S$1.5 billion ($1.1 billion) bond issuance aimed at strengthening the financial position of its marine and offshore engineering subsidiary Sembcorp Marine has found backers that include Temasek Holdings, the company said in a disclosure.
Sembcorp Industries, a Singaporean industrial conglomerate, is providing Sembcorp Marine with a five-year subordinated loan facility of S$2 billion to help it retire S$1.5 billion of borrowings amidst the current downturn in the global offshore and marine industry.
According to the disclosure, Sembcorp Marine will use the balance S$500 million ($369 million) for working capital and general corporate purposes.
Sembcorp Industries, Sembcorp Marine’s largest shareholder, will issue S$1.5 billion of bonds to DBS Bank as sole lead manager and initial purchaser through a private placement. Temasek is one of the bonds’ investors.
“The respective board of directors of Sembcorp Industries and SembMarine have considered a wide range of options and decided that the proposed financing option would be in the best interests of the companies,” the two companies said in a joint announcement.
The issue of the bonds has been approved by the Board of Directors and the Audit Committee of Sembcorp Industries.
Since 2009, Sembcorp Marine has made substantial strategic investments in yard and engineering capabilities and acquired new technologies that allow it to offer diversified solutions across the offshore, marine, and energy industries, according to the disclosure.
It delivered strong and consistent performance for 15 years before 2014, with cumulative net profit of approximately S$5.4 billion.
“However, Sembcorp Marine’s current financial performance and position have been affected by the prolonged and severe downturn of the global offshore and marine industry,” the announcement said.
Early this month, Azalea Investment Management, a unit of Temasek, made a public offer for $132 million (S$180 million) Class A-1 private equity (PE) bonds – part of Astrea V PE Bonds – at a fixed interest rate of 3.85 per cent each year.
The public offer for Class A-1 bonds, the second listed PE bonds available to retail investors in Singapore, was announced after a placement to institutional investors, which witnessed strong demand.