PETALING JAYA: The fate of financially-distressed Singapore shipping company Otto Marine Ltd, which is owned by Malaysian tycoon Datuk Seri Yaw Chee Siew, is in the hands of Barakah Offshore Petroleum Bhd .
Sources said Otto Marine was banking on getting contracts from Barakah to resuscitate its business which is on the verge of collapse.
“Barakah may even take up a stake in Otto Marine if the collaboration pans out,” said a source.
There have been reports that Otto Marine would face collapse without the intervention of Singapore courts. Based on its current cash reserves, it could probably only subsist for two more months. Otto Marine was delisted in 2016 and has been recording losses since 2011.
It appeared that Otto Marine might have secured a letter of intent from an “unidentified party” willing to invest in the firm if certain conditions were met, said Chee Siew the executive chairman, in court papers, reported by Bloomberg.
Sources said that Barakah could be the white knight.
This would make sense as the founder of Sarawak’s timber giant Samling group Tan Sri Yaw Teck Seng is the second largest shareholder of Barakah with an 11.91% stake via United Power Group Holdings Ltd. He is Chee Siew’s father.
United Power has been increasing its stake in Barakah in 2017.
Teck Seng is deemed interested by virtue of his shareholding in Yaw Holding Sdn Bhd, which owns United Power’s holding company Samling Energy Sdn Bhd.
The Samling group is one of the conglomerates in Sarawak with its main business in the plantation, forestry and property development sectors, and via Samling Energy, it has a presence in the oil and gas (O&G) sector.
Meanwhile, Chee Siew is best known in local circles as the executive chairman of Perdana Parkcity Sdn Bhd – the developer of the successful Desa ParkCity township in Kepong.
When the Samling Group started upping its stake in Barakah last year, many saw it as an entry into the O&G industry in Sarawak.
In September, Sarawak set up its own version of Petroliam Nasional Bhd – Petroleum Sarawak Bhd (Petros). Petros is looking for a chief executive and other key officials to drive the organisation.
All O&G-related jobs in Sarawak will likely be channelled through Petros.
Barakah, which is mainly involved in the offshore pipeline service provider segment, could be a good vehicle for the Samling group.
Founder and chief executive officer Nik Hamdan Daud is the single largest shareholder with a 39% stake.
Barakah closed last Friday at 28 sen, down 61.54% on a one-year basis. At this level, it has a market cap of RM227.26mil.
For now, Barakah remains loss-making. For the nine months to Sept 30, 2017, it recorded losses of RM142.87mil from a net profit of RM10.45mil in the same period previously.
Revenue decreased to RM232.26mil from RM407.46mil duting the same period previously.
Last November, Barakah’s unit, PBJV Group Sdn Bhd, entered into a consortium agreement with Brooke Dockyard and Engineering Works Corp and Samling Energy to jointly bid for O&G-related projects in Sarawak.
Upon the successful award of the contracts, the parties would enter into a specific project consortium agreement and determine the scope of work of each party, Barakah said in a filing with Bursa Malaysia.
Brooke Dockyard is a leading marine engineering and fabrication company involved in the engineering, procurement, construction and commissioning of offshore O&G platforms, shipbuilding and ship repair, bridges, infrastructure, and onshore manufacturing.
Meanwhile, Samling Energy has significant investments in the O&G sector, including offshore support vessels and shipyard, and has expertise that includes transport and installation, decommissioning and drilling.
Otto Marine is among companies in the O&G services industry struggling to meet financial obligations after a plunge in crude prices.
Among its peers that have fallen are Swiber Holdings Ltd, Ezion Holdings Ltd and Ezra Holding Ltd.
Otto Marine, which is saddled with liabilities of US$877mil, is asking the Singapore High Court for protection.
The shipbuilder wants to turn around under the court’s supervision and fend off creditors while it restructures its debt, according to its Feb 20 application for judicial management, which was obtained by Bloomberg.
In the application, Chee Siew was quoted as saying: “I cannot be expected to continue shouldering the financial burden and injecting fresh capital into the company.”
Chee Siew took full control of the ailing firm in October 2016 and is the single biggest creditor with S$208mil due to him and affiliates, the papers showed.
The financial collapse of the group is imminent unless the High Court provides breathing room, he said.
According to Chee Siew, there is a reasonable probability of rehabilitating the company.