THORESEN THAI AGENCIES -Translation-
The Independent Financial Advisor's Opinion Report
on the Connected Transaction Regarding the Providing of Financial Assistance in the form of a guarantee to financial institution providing guarantees for Mermaid Maritime Public Company Limited and/or its subsidiaries
Present to
Shareholder Thoresen Thai Agencies Public Company Limited
Prepared by
Avantgarde Capital Co., Ltd.
28 March 2024
28 March 2024
Subject The Independent Financial Advisor's Opinion Report on the Connected Transaction Regarding the
Providing of Financial Assistance in the form of a guarantee to financial institution providing guarantees for Mermaid Maritime Public Company Limited and/or its subsidiaries.
To
The Director and Manager of the Stock Exchange of Thailand.
With reference to Thoresen Thai Agencies Public Company Limited ("TTA" or the "Company") in its
Board of Directors' Meeting No. 02/2024 held on 6 March 2024 passed the resolution that it deemed appropriate to propose the 2024 Annual General Meeting of Shareholders ("e-AGM") to consider and approve the provision of financial assistance in the form of a guarantee amounting USD 51.74 million or approximately to THB 1,867.60 million (USD 1 : THB 36.0959, reference to foreign exchange rate announced by the Bank of Thailand as of 29 February 2024) to financial institution providing guarantees for Mermaid Maritime Public Company Limited ("MML") and/or its subsidiaries (collectively called "MML Group"). MML is a subsidiary of the Company holding 58.22 percent of its total shares issued and paid-up, listed on the Singapore Stock Exchange. Details of which are as follows:
1. Date of Transaction
The Company will be able to enter into the transaction after obtaining approval from the 2024 e-AGM on 26 April 2024.
2. Parties Involved and Relationship with the Company
• Guarantor: Thoresen Thai Agencies Public Company Limited or TTA
▪ A shareholder of MML holding 58.22 percent of the total shares issued and paid-up, directly and indirectly. [Holding directly 49.53 percent and indirectly, through two of its 99.99 and 100 percent owned subsidiaries, 1.47 percent through Athene Holdings Ltd. ("ATH") and 7.25 percent through Soleado Holdings Pte. Ltd. ("SOH"), respectively].
• Financial Assistance Recipient: Mermaid Maritime Public Company Limited ("MML") and/ or its subsidiaries ("MML Group")
▪ Primary Activity: Offshore services investments.
▪ MML is a subsidiary of TTA holds 58.22 percent of the total shares issued and paid-up, directly and indirectly through ATH and SOH. MML is listed on the Singapore Stock Exchange.
• Shareholding Structure Chart:
In Year 2023, TTA had revenue of THB 23,975.52 million, which Offshore Services Group (MML) accounted for 40.16 percent of TTA total revenue. MML had revenue of THB 9,628.56 million, increasing 21.79 percent YoY from almost every service. MML's revenue structure consists of subsea inspection, repair, and maintenance (Subsea-IRM) 56.01 percent, Cable Laying 14.62 percent, and decommissioning and transportation & installation (Decommissioning T&I) 29.37 percent.
• Name of Connected Persons: Director
TTA | MML |
1. Mr. Prasert Bunsumpun
| 1. Mr. Prasert Bunsumpun
3. Dr. Jean Paul Thevenin |
Shareholders
Name | TTA (as of 21 March 2024*) | MML (as of 21 March 2024**) | ||
No. of Shares | Percent | No. of Shares | Percent | |
1. TTA Group
| - - - - | - - - - | 822,908,013 700,000,000 20,798,420 102,109,593 | 58.22 49.53 1.47 7.22 |
2. Mr. Chalermchai Mahagitsiri /1
| 427,679,159 277,679,159 150,000,000 | 23.47 15.24 8.23 | 150,461,660 | 10.65 |
3. Ms. Aussana Mahagitsiri | 99,866,937 | 5.48 | 63,588,647 | 4.50 |
4. Mr. Prayudh Mahagitsiri /2
| 110,152,458 87,531,758 22,620,700 | 6.04 4.80 1.24 | 54,536,882 | 3.86 |
5. Mrs. Suvimol Mahagitsiri | 42,325,623 | 2.32 | - | - |
6. Mr. Prasert Bunsumpun | 182,000 | 0.01 | - | - |
* The latest book closing of TTA as of 10 October 2023 ** The latest information from MML as of 10 August 2023
Remark:
/1 Mr. Chalermchai Mahagitsiri indirectly held 150,000,000 shares under a custodian account. The combined shares of Mr. Chalermchai Mahagitsiri both direct and indirect is totaling 427,679,159 shares or 23.47 percent of the total issued and paid-up shares of the Company.
/2 Mr. Prayudh Mahagitsiri indirectly held 22,620,700 shares under a custodian account. The combined shares of Mr. Prayudh Mahagitsiri both direct and indirect is totaling 110,152,458 shares or 6.04 percent of the total issued and paid-up shares of the Company.
Reasons, necessity and benefits that person who may have conflicts of interest hold more than 10.00 percent of MML's total voting shares:
Mr. Chalermchai Mahagitsiri has high credential experience and knowledge in marine transportation and business related to offshore services businesses as well as management experience in joint ventures with leading international companies such as the first-ranked company in global food and beverage manufacturers and the world's sixth-ranked steel producer in South Korea. Hence, Mr. Chalermchai Mahagitsiri's expertise and credentials are widely acknowledged internationally. Moreover, Mr. Chalermchai's international business networks are important success factor for MML to build credential and gain trust from
international counterparties in various regions of the world including the Middle East, North Africa, and Southeast Asia. Moreover, MML is a listed company on the Singapore Stock Exchange. Mr. Chalermchai's shareholding in MML provides confidence to stakeholders, local and international investors, and joint venture counterparties under MML's subsidiary, for example, the development of robotic and artificial intelligence technologies for subsea-IRM services. This technology will increase the Company's core competency to compete in subsea-IRM services business more effectively and result in earnings growth.
3. General Characteristics of Transaction
MML Group is primarily a comprehensive offshore service provider, emphasizing engineering work both without the use of vessels and involving specialized vessel and equipment designs. This includes underwater equipment, remotely operated underwater vehicles (ROVs), and highly skilled personnel with expertise in the company's specific business areas. The main categories can be divided into 3 types:
1) Subsea Inspection, Repair and Maintenance (Subsea-IRM)
2) Cable Laying (Cable Laying)
3) Decommissioning and Transportation & Installation (Decommissioning T&I)
MML Group has secured contracts from the world's leading petroleum exploration and production company for 5 projects, totaling USD 382.40 million or approximately THB 13,803.07 million (USD 1 : THB 36.0959, reference to foreign exchange rate announced by the Bank of Thailand as of 29 February 2024). However, all 5 employment contracts have stipulated conditions requiring the MML Group to provide a letter of guarantee from a financial institution (L/G Performance Bond) to ensure the performance of the contract, with the amount ranging from 10.00 to 15.00 percent of the project value, guarantee amount totaling USD 51.74 million or approximately THB 1,867.60 million. Further details and conditions of the employment contracts are as follows.
1) Decommissioning and Transportation & Installation project in the Gulf of Thailand between the
MML Group and leading companies in petroleum exploration and production in Thailand has a project value of USD 270.00 million or approximately THB 9,745.89 million. The project period begins from the second quarter of 2024 to the fourth quarter of 2026. A letter of guarantee from a financial institution is required for this project, with a value equal to 15.00 percent of the project value, equivalent to USD 40.50 million or approximately THB 1,461.88 million.
2)The Subsea-IRM project in Qatar between MML Group and leading companies in the world's petroleum exploration and production has a project value of USD 25.00 million or approximately THB 902.40 million. The project period spans from the first quarter of 2024 to the fourth quarter of 2024. A letter of guarantee from a financial institution is required for this project, with a value equal to 10.00 percent of the project value, equivalent to USD 2.50 million or approximately THB 90.24 million.
3) The Subsea-IRM project in Saudi Arabia between MML Group and leading companies in the world's petroleum exploration and production has a project value of USD 20.00 million or approximately THB 721.92 million, the project period spans from the first quarter of 2024 to the fourth quarter of 2024. A letter of guarantee from a financial institution is required for this project, with a value equal to 10.00 percent of the project value, equivalent to USD 2.00 million or approximately THB 72.19 million.
4) The Cable Laying project in Saudi Arabia involves collaboration between MML Group and a leading global exploration and petroleum production company. The project has a total value of USD 6.40 million or approximately THB 231.01 million. It spans from the second quarter of 2024 to the third quarter of 2024. As part of the project, a financial guarantee from a financial institution is required, amounting to 10.00 percent of the project value, equivalent to USD 0.64 million or approximately THB 23.10 million
5) The Cable Laying and Communication Cable Post project in Saudi Arabia involves collaboration between the MML Group and a leading global exploration and petroleum production company. The project has a total value of USD 61.00 million or approximately THB 2,201.85 million. It spans from the second quarter of 2024 to the third quarter of 2024. As part of the project, a financial guarantee from a financial institution is required, amounting to 10.00 percent of the project value, equivalent to USD 6.10 million or approximately to THB 220.18 million.
Currently, MML Group is in negotiations with a financial institution in Thailand. The preliminary approval was granted on 20 February 2024, with the official approval expected to be completed by April 2024. The details of the credit limit, conditions, and important collateral are as follows:
Contracting Parties | Lender: One financial institution Borrower: MML Group |
Guarantee Type | L/G Performance Bond (Specific Case) |
Objectives | Guarantee a performance of MML Group |
Value | USD 51 . 74 million or approximately THB 1,867.60 million |
Fee Rate | 1.55 percent per annum |
Collateral | Mortgaging 2 vessels of the MML Group, with a total value of USD 118.00 - 128.00 million, was assessed by M3 Marine Valuations Pte Ltd on 12 September 2022. |
Corporate Guarantee | Mermaid Maritime Public Company Limited and Thoresen Thai Agencies Public Company Limited both guarantee the full amount. |
Other Conditions | None |
Remark: The Company will sign the contract after receiving approval from shareholders meeting.
In this regard, based on the approved credit limit information that MML Group has received on a principal basis from a financial institution as mentioned above, to enable the MML Group to proceed with the contract, TTA is required to guarantee the aforementioned credit limit not exceeding USD 51.74 million or approximately THB 1,867.60 million. The draft terms and conditions of the financial assistance agreement in the form of a guarantee between TTA and the MML Group are as follows:
Contracting Parties | Mermaid Maritime Public Company Limited ("MML") and/or its subsidiaries (collectively "MML Group") |
Guarantee Type | Financial Assistance in the form of guarantees |
Objectives | As a corporate guarantor for the revolving Letter of Guarantee (L/G) Performance Bond (Specific Case) to the financial institution |
Value | USD 51. 74 million or approximately THB 1,867.60 million |
Fee Rate | 1.00 percent per annum |
Terms and Conditions | None |
Other Conditions | In the event that the financial institution demands payment from the company according to the value paid to the project employer, the company will send a letter to notify the MML Group to make the payment along with related expenses within the specified period. Should the MML Group make a late payment, interest will be charged at a rate of 9 .00 percent per annum, calculated from the due date until the full amount is paid. |
Conditions that may affect shareholders' rights | None |
Collateral | None |
In addition, MML Group raised fund for investments and working capital by applying for credit facilities from financial institutions and borrowing from affiliates. As of 29 February 2024, MML Group has intercompany borrowings in the total amount of USD 69. 00 million. Details of TTA financial assistance to MML and its subsidiaries is shown below.
• Summary o of TTA financial assistance to MML and its subsidiaries as of 29 February 2024
Type of Financial Assistance | Date of Providing Financial Assistance | Principal Amount (MUSD) | Outstanding Amount (MUSD) | Guarantee Fee per Annum / Interest Rate (Percent) | Objective |
Corporate Guarantee | 16 September 2021 | 2.771/ | 1.51 | 0.50 | Guarantee a loan for working capital |
21 September 2023 | 3.00 | - | 0.50 | Guarantee a loan for working capital |
Guarantee a loan for investment
21 September 2023
5.95
5.95
1.00
Subject to approval by the 2024 e-AGM Total Corporate Guarantee
51.74
-
1.00
Guarantee a performance of MML
Group
Amount
27 December 2021
16 December 2022
10 February 2023
5.00 4.00 7.50
5.00 4.00 7.50
7.00 7.00 7.00
Working capital Working capital Working capital
Loan
27 April 2023
25 September 2023
12.50 5.00
12.50 5.00
7.00 7.00
Working capital
29 November 2023
Assistance of MML and/or its subsidiaries
Total Loan Amount Grand Total Amount of Financial
50.00 84.00 147.46
35.00 69.00 76.46
7.00
Investment Investment and working capital
Remark: 1/ This credit line amount has been approved a total of THB 100.00 million, or approximately 2.77 MUSD
(USD 1: THB 36.0959, reference to foreign exchange rate announced by the Bank of Thailand as of 29 February 2024). In the past, MML Group has had a clean record of never default payments both principal and interest to the Company.
4. Type and Size of Transaction
This transaction is considered a connected transaction involving the provision of financial assistance to a company that TTA holds more shares than the connected person according to the Notification of Capital Market Supervisory Board No. TorChor 21/2551 Re: Rules on Connected Transactions, and Notification of the Board of Governors of the Stock Exchange of Thailand Re: Disclosure of Information and Other Acts of Listed Companies Concerning the Connected transactions, 2003 (the "Notifications"). Total value of the transaction is USD 53.13 million or approximately THB 1,917.64 million. This includes a guarantee value of USD 51.74 million or approximately THB 1,867.60 and a total fee over the contract period of USD 1.39 or approximately THB 50.04 (USD 1 : THB 36.0959, reference to foreign exchange rate announced by the Bank of Thailand as of 29 February 2024), or equivalent to 8.92 percent of the Company's Net Tangible Assets ("NTA") according to the latest consolidated financial statements as of 31 December 2023.
When combining the size of this transaction and the connected transactions undertaken by the Company during the past six months which have not yet been approved by the shareholder's meeting based on the aforementioned Notifications, this results in the total value of transactions of 11.65 percent of NTA. These items consist of
1) Loan of USD 5.00 million with a total value of USD 5.57 million (principal and interest over the loan period) or approximately THB 202.46 million or equivalent to 0.91 percent of NTA at the transaction occurred,
2) Corporate guarantee of USD 3.00 million with a total value of USD 3.77 million (principal and fees throughout the life of the guarantee contract), or approximately THB 137.16 million or equivalent to 0.62 percent of NTA at the transaction occurred,
3) Corporate guarantee of USD 5.95 million with a total value of USD 7.34 million (principal and fee over the loan period), or approximately THB 266,931,091 or equivalent to 1.20 percent of NTA at the transaction occurred, and
4) Corporate guarantee of USD 51.74 million with a total value of USD 53.12 million (principal and fees throughout the life of the guarantee contract) to financial institution providing guarantees for MML and/ or its subsidiaries, or approximately THB 1,867,601,866 (USD 1 : THB 36.0959, reference to foreign exchange rate announced by the Bank of Thailand as of 29 February 2024) or equivalent to 8.92 percent of NTA, exceeding 3.00 percent of the Company's NTA according to the latest consolidated financial statements as of 31 December 2023.
Therefore, the Company is required to
a) Disclose the information of the transaction to the Stock Exchange of Thailand.
b) Appoint an independent financial advisor, whereby the Company appointed Avantgarde Capital Co., Ltd. as an independent financial advisor to provide an opinion on the Company's connected transaction to the shareholders for consideration and approval of the transaction and deliver such opinion to the Securities and Exchange Commission ("SEC") and the Stock Exchange of Thailand ("SET"); and
c) Seek approval for entering the Company's connected transaction from a shareholders' meeting with votes of not less than three-fourths of the total votes of the shareholders attending the meeting and having the right to vote, excluding interested shareholders, where the Company must send a notice of such meeting to the shareholders at least 14 days prior to the meeting date.
In this regard, items 1), 3), and 4) must be used to calculate the accumulated transaction size retrospectively in accordance with the Notification of Capital Market Supervisory Board No. TorChor 21/2551 Re: Rules on Connected Transactions, and Notification of the Board of Governors of the Stock Exchange of Thailand Re: Disclosure of Information and Other Acts of Listed Companies Concerning the Connected transactions, 2003.
5. Expected Benefit to be Received
The Company will receive a return as a guarantee fee of 1.00 percent per annum, which is appropriate because the fee rate that TTA has guaranteed with the MML group in the past falls within the range of 0.50 - 1.00 percent per annum, aligning with TTA's guarantee fee rate. Additionally, the guarantee fee rate is consistent with the rates offered by commercial banks, which range from 0.50 to 1.55 percent. Furthermore, this guarantee assistance will facilitate the smooth operation of the MML Group in meeting customer requirements. Consequently, the MML Group is expected to experience increased income and net profit, which will be reflected in TTA's consolidated financial statements. Moreover, MML has been able to repay its loans to TTA and anticipates being able to pay dividends to TTA in the future.
In consideration of MML's operational performance in the year 2023, the net profit amounted to THB 345,867,248, showing a significant improvement of 912 percent compared to the year 2022, where the net profit was THB 34,159,981. This improvement is attributed to enhanced operations, particularly in the subsea-IRM (Inspection, Repair, and Maintenance) engineering services, which saw a substantial increase in revenue by 43 percent compared to the same period of the previous year. This growth is a result of increased short-term chartering of vessels and non-vessel-related projects in subsea engineering exploration and maintenance. Additionally, the utilization rate of subsea engineering vessels increased to 91 percent in the year 2023, compared to 79 percent in the year 2022. In terms of revenue, the Decommissioning and Transportation & Installation (T&I) projects also saw an increase of 28 percent, compared to the same period in the previous year. This growth is attributed to the successful expansion of business operations in Thailand and Southeast Asia, resulting in an initial profit increase of 57 percent to THB 1,825,871,596. The initial profit margin also increased from 15 percent in 2022 to 19 percent in the year 2023. Moreover, MML has a Debt Service Coverage Ratio (DSCR) of 1.03 as of 31 December 2023, indicating a high ability to repay debts. Additionally, MML Group has a history of high-value service contracts awaiting delivery, totaling USD 734,166,532. Therefore, obtaining financial assistance in the form of guarantees from TTA is in line with the conditions set by the issuing financial institutions for Bank Guarantees provided to MML and/or its subsidiaries. Delivering these guarantees to clients to secure performance as per client conditions will instill confidence in clients, facilitating future business expansion. This sustainable business growth contributes to TTA's overall financial statement growth sequentially.
6. Source of Fund
The guarantor is not required to utilize capital sources unless MML and/ or its subsidiaries are unable to fulfill their contractual obligations to clients, resulting in the guarantor bank being called upon to indemnify damages for guaranteeing. However, based on the operational experience and service quality of MML and its subsidiaries, which have consistently delivered high-quality services and fulfilled contractual obligations to clients, there is no history of the guarantor bank being called
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Thoresen Thai Agencies pcl published this content on 28 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 28 March 2024 12:21:58 UTC.
