KUALA LUMPUR (Oct 28): Practice Note 17 (PN17) firm Barakah Offshore Petroleum Bhd (KL:BARAKAH) has entered into a preliminary agreement to sell its pipe-laying barge, Kota Laksamana 101 (KL101 Barge), three days before the Oct 31 deadline to submit its regularisation plan to the relevant regulatory authorities for it to exit the financially distressed category.
In a filing with Bursa Malaysia on Monday, Barakah said its indirect wholly-owned subsidiary Kota Laksamana 101 Ltd has entered into a conditional memorandum of agreement with Indonesian shipping offshore company PT Wintermar Rajawali Asia (PT WRA) for the proposed disposal of the KL101 Barge at a cash consideration of US$9.70 million (approximately RM41.81 million).
PT WRA is 50%-owned by PT Wintermar Offshore Marine, a publicly-listed company on the Indonesia Stock Exchange.
This confirms an article by The Edge Malaysia, in its Sept 16 edition of The Edge Weekly, which reported that Barakah as undergoing discussions for the potential sale of the barge at under US$10 million.
Although the final cash consideration of US$9.70 million is lower than the minimum disposal consideration of US$11.4 million approved by Barakah’s shareholders on March 25, Barakah on Monday said the offer by the Indonesian company was the only one it received after conducting an auction and a private tender. The group said it will re-seek shareholders' approval for the proposed disposal.
Proceeds from the disposal are intended to be utilised solely for the partial repayment of the US$11.06 million sum owed to Export-Import Bank of Malaysia Bhd (EXIM Bank).
Barakah said EXIM Bank had, vide its letter dated Sept 26, indicated it was supportive of a repayment of US$9.55 million (RM41.42 million) to be repaid using proceeds from the proposed disposal, and the remaining US$1.45 million (RM6.30 million) to be settled via a repayment schedule yet to be determined.
The group said it intends to utilise its cash and bank balances, which stood at RM54.56 million as at June 30, for the settlement of the remaining US$1.45 million.
The proposed disposal, Barakah said, is also part of the group’s cost-cutting initiative to realise the value of the idle KL101 Barge. The vessel has been idle since September 2019.
For the financial year ended June 30, 2024, the group recorded an additional impairment loss of RM16.1 million for the KL101 Barge based on the reassessed recoverable amount following the unsuccessful auction.
Upon completion of the proposed disposal and repayment of the debt owed to EXIM Bank, Barakah said the group is expected to be in a better position to regularise its financial position as annual expenses for the KL101 Barge of approximately RM2.09 million for maintenance expenses and RM3.52 million for depreciation will no longer be incurred.
The proposed disposal is expected to be completed by the first quarter of calendar year 2025.
Barakah fell into PN17 status in March 2019 after defaulting on payments to EXIM Bank for the vessel.
Shares in Barakah ended unchanged at four sen on Monday, giving the company a market capitalisation of RM40.12 million.