Pacific Radiance is seeking permission from its bondholders for a revised debt restructuring plan regarding its $100 million 4.3 per cent medium-term notes.
In the consent solicitation exercise (CSE), the offshore and marine group is still proposing a debt-to-equity conversion of the notes in full, but bondholders will now receive 19 new shares for every $5 held - equating to 26.3 cents per share.
It had initially planned to offer a full conversion of the notes to fresh equity at a rate of three new shares for every $1 held, or at 33 cents apiece. The company will also pay bondholders two coupon payments totalling $4.3 million from an escrow account, in line with its preliminary proposal.
The CSE is aimed at addressing the maturity of the notes, due Aug 29, and it has to be launched in the second quarter, the company said.
Aside from the "sweetened" conversion ratio, however, nothing much has changed, said OCBC credit analyst Nick Wong. Once the new shares are issued, bondholders will collectively control about 35 per cent of the company, while the founding Pang family will likely retain a 44 per cent stake.
"Without clarity on whether there would be further dilution from future rights issues or share (issues) to other creditors, bondholders are being asked to give up their protection as a creditor and to become a common shareholder," Mr Wong noted.
Pacific Radiance bondholders were unimpressed. "Once we accept their proposal, we are no longer bondholders. We will drop in the totem pole," said Mr Paul Tobin, who heads the bondholders' steering committee.
Bondholders also took issue with Pacific Radiance's decision to continue paying dividends in the last three years, despite rising debt levels. The company paid out US$5.3 million (S$7 billion) in dividends for the fiscal year 2016. Total liabilities were US$615.3 million as at Dec 31, 2016, while total equities stood at US$289 million.
Pacific Radiance has called for a bondholders' meeting on Feb 26 at 10am to approve resolutions pertaining to the revised proposal. Its shares finished 14.2 per cent or 1.7 cents up at 13.7 cents yesterday, after the announcement was made in the morning.