Loss-making Sembcorp Marine unveiled plans for a S$2.1 billion ($1.5 billion) recapitalisation through a rights issue backed by the rig builder's parent firm, Sembcorp Industries, and state investor Temasek Holdings [TEM.UL].
Industrial conglomerate Sembcorp Industries also proposed to demerge Sembcorp Marine through a distribution of its stake in the rig builder to its shareholders after the rights issue.
"This recapitalisation will improve our cash position, fund ongoing financial commitments, strengthen our balance sheet and ensure long-term viability," said Wong Weng Sun, CEO of Sembcorp Marine.
The firm, which has suffered for the last few years due to a prolonged downturn in the rig-building sector, was last valued at about S$1.8 billion.
After the deal, Temasek, which is a large shareholder of Sembcorp Industries, will become a direct shareholder of Sembcorp Marine, with a stake of more than 29%.
Sembcorp Industries, which owns 61% of Sembcorp Marine, will subscribe for its share of S$1.27 billion in the rights issue and take up an additional S$0.23 billion if needed, by setting it off against an outstanding S$1.5 billion loan extended to Sembcorp Marine in 2019. It will not need to contribute cash as part of its rights subscription.
Temasek has agreed to sub-underwrite the remaining S$0.6 billion of the issue.
Monday's announcement came after shares in Sembcorp Marine and Sembcorp Industries were halted from last Thursday, prompting speculation among some analysts about a potential deal between the two firms.
(Reporting by Anshuman Daga and Aradhana Aravindan; Editing by Tom Hogue and Muralikumar Anantharaman)