This article first appeared in The Edge Financial Daily on September 27, 2019

KUALA LUMPUR: Billionaire T Ananda Krishnan’s private investment vehicle, Usaha Tegas Sdn Bhd, gave troubled Bumi Armada Bhd a lifeline by offering loans of up to US$75 million (RM317 million).

Usaha Tegas is Bumi Armada's single largest shareholder with a 34.9% stake via Objektif Bersatu Sdn Bhd.

In a Bursa Malaysia filing yesterday, the loss-making offshore energy facilities and services provider said its wholly-owned units — Bumi Armada 98/2 Holdings Pte Ltd (BA98/2) and Armada Floating Gas Storage Malta Ltd (AFGSM) — have received financing commitments for the said amount from Mezzanine Equities NV (MENV), a wholly-owned unit of Usaha Tegas.

According to the filing, the funds comprise a three-year term loan facility of up to US$30 million (RM128 million) to BA98/2 and a six-year term loan facility of up to US$45 million (RM189 million) to AFGSM.

The BA98/2 facility will fund Bumi Armada’s 30% equity interest in a joint-venture project with Shapoorji Pallonji Oil & Gas Pte Ltd in relation to a floating production storage and offloading (FPSO) facility contract in India.

Bumi Armada said security for the BA98/2 facility is based on its 30% interest in the project.

MENV has also been granted options to acquire Bumi Armada’s 30% interest in the project at fair market value as determined by an independent valuer.

The options may be exercised by MENV at any time within 36 months from the date of grant or until the BA98/2 facility has been fully repaid, whichever is longer.

However, the exercise of the options is subject to the approvals of Bumi Armada shareholders and/or other relevant consents being obtained.

Bumi Armada may sell its interest in the project to any third party during the option period, subject to obtaining MENV’s consent.

All proceeds arising from a valid exercise of the options must be applied towards repayment of the BA98/2 facility, said Bumi Armada.

Meanwhile, the AFGSM facility is intended for the refinancing of its existing US$45 million bridge loan facility for a floating storage unit (FSU), which is currently servicing a long-term charter contract with ElectroGas Malta Ltd. Security for the facility is based on certain project assets, including a mortgage over the FSU and an assignment over AFGSM’s rights under the FSU charter contract.

Bumi Armada said the facilities are not expected to have any material effect on the group's earnings for the financial year ending Dec 31, 2019 (FY19).

For FY18, Bumi Armada recorded a net loss of RM2.3 billion, versus a net profit of RM352.2 million for FY17, mainly due to the impairment of Armada Kraken FPSO and certain offshore support vessels, allowances for impairment losses and higher finance costs.