Otto Marine's chairman seeks firm's delisting
Otto Marine's executive chairman and controlling shareholder
Yaw Chee Siew has proposed a voluntary delisting for the offshore and marine
player amid a protracted industry downturn.
Remisier kings
The cousins who have taken over Peter Lim’s throne View PDF
Comments
Tan Hwee Hwee
09 June 2016
Otto Marine's executive chairman and controlling shareholder Yaw Chee Siew has proposed a voluntary delisting for the offshore and marine player amid a protracted industry downturn.
Ocean International Capital (OIC), the vehicle through which Mr Yaw is undertaking the delisting, will be making a cash exit offer of S$0.32 per share, representing a 39.13 per cent premium to the last transacted price of S$0.23 on June 1 prior to a trading halt. Mr Yaw, the sole director of OIC, has a total interest of 61.2 per cent in Otto.
A joint announcement by OIC and Otto on Wednesday said the proposed delisting is subject to a pre-condition to get specified approvals and waivers from note-holders.
Wholly owned subsidiary Otto Marine Services has issued S$70 million Series 002 7% notes which have an Aug 1 maturity date. Mr Yaw, who has an interest of S$2 million in these notes, will procure an undertaking from OIC to redeem these notes subject to the successful completion of the delisting. A note-holders' meeting will be convened to secure their consent to extend the maturity date for six months or until the completion of the delisting, and for waiver of compliance with certain covenants.
A Malaysian tycoon with varied personal and family business interests, Mr Yaw is said to have made the offer to delist Otto because the costs of being listed have outweighed its benefits in this O&M downturn.
Otto has two key businesses - shipbuilding and ship-chartering - that are historically most exposed to the offshore support vessel (OSV) segment.
In the past six months, the O&M player's efforts at raising funds from the equity market drew almost a naught as would-be investors continued to shy away from committing to any transactions in the affected oil and gas sector, one informed source said.
Seasoned broker Mike Meade of M3 Marine separately noted Otto Marine's failed attempt at raising funds to build an OSV at a third-party yard about six months ago. This was despite Otto's wholly owned subsidiary GO Offshore having secured a multi-year contract from Inpex Australia for the vessel, Mr Meade said.
Not helping also to sustain Otto's interest in maintaining its listing are the regulatory compliances, which have come to hinder further cost restructuring at Otto Marine.
Going by SGX rules, Otto is required to seek shareholders' approval for transactions exceeding 20 per cent of its market capitalisation, which last stood at S$48.84 million.
But the costs of restructuring exercises in the pipeline would easily involve amounts bigger than the company's market cap, observers said.
Mr Meade cited the restructuring of sale and leaseback agreements on Otto's high-value offshore support vessels as an example.
Restructuring these agreements could be impossible to achieve if Otto remains listed given some of its vessels were worth about US$90 million apiece at the peak of the market, easily exceeding the company's current market cap. Yet, these would have been a necessary change considering how far Otto has already cut its administrative and operating costs. The O&M player has seen its selling and administrative expenses decline by 29.1 per cent to US$5.73 million for the first quarter of FY16.
Prior to Mr Yaw's offer, Otto is also understood to have successfully renegotiated for interest rate reductions on its outstanding bank loans from its four key bank lenders - DBS, UOB, OCBC and ICBC.
The listed company is pulling out all stops to cut costs in order improve its cash flows amid reduced revenue contributions from both its shipbuilding and ship-chartering businesses.
Otto narrowed its first quarter net loss to US$1.38 million in FY16, from US$13.23 million a year ago.
The joint announcement said: "In view of the low trading volume, the exit offer represents an opportunity for shareholders (without incurring any brokerage and other trading costs) to realise their investments in shares at a price which may not otherwise be readily available." Prior to the June 1 trading halt, average trading volume over three months in Otto's shares was 257,853, representing 0.34 per cent of total number of free float shares in the company.
Otto is expected to call an extraordinary general meeting in the next two months to seek shareholders' approval for the proposed voluntary delisting, which also needs the approval of the Singapore Exchange.
If entitled, the offeror intends to exercise its right of compulsory acquisition.
RHB Securities Singapore acts as the financial adviser to Mr Yaw for the proposed voluntary delisting.