Bumi Armada says it’s not in default risk

> Marine services provider missed October deadline to restructure US$500m worth of unsecured short-term loans

PETALING JAYA: Bumi Armada Bhd management said the group is not in a default risk despite pushing back its US$500 million (RM2.09 billion) debt restructuring plan to the first half of 2019( 1H19), according to UOB Kay Hian.

It was reported that Bumi Armada has missed its proposed October deadline to restructure the US$500 million worth of unsecured short-term loans due in three tranches by May 2019.

The group also has short-term debts of RM2.22 billion and RM1.95 billion debts that are ring-fenced around FPSO Kraken, which can be reclassified into long-term debts.

In maintaining a “buy” call on Bumi Armada with a target price of 66 sen, the research house said it does not anticipate the group to sink into the red and takes a wait-and-see approach towards 2019 on expectations for it to resolve its balance sheet issues.

UOB Kay Hian quoted Bumi Armada management as saying that the group is working with lenders and there are no defaults or any deadlines in the current renegotiation of extending the refinancing of short-term loans. It is also not considering an equity fund raising, and will not secure any projects in the near term until it resolves the balance sheet.

“Bumi Armada has no intention to go for a rights issue as it is pursuing other options – refinance, EMTN (Euro medium-term notes) or trust (infrastructure funds) – to raise funds. A rights issue at the current price would not raise much money and would further erode share price.”

While current risk-reward is palatable, the research house said stock sentiments will continue to be weak on balance sheet concerns and earnings confidence issue.

UOB Kay Hian also does not expect further major unexpected negative surprises in the earnings of the floating, production, storage and offloading (FPSO) segment after a cut in earnings forecasts earlier in view of potential downside to offshore marine service earnings in 2019.

Bumi Armada’s share price gained 1.3% to close at 39.5 sen yesterday with 10.95 million shares changing hands.