Where next for Keppel shares after Floatel restructuring?

• Keppel Corp (SGX: BN4) share price rose 2.5% on Monday, after the company announced an agreement has been reached for a consensual transaction between its associate Floatel and FELS Offshore
• Most agreement terms are similar to an earlier statement, except that the transaction will no longer require the setting of a new company or new company acquisition
• Floatel has also taken a new US$100 million super senior revolving credit facility from Temasek portfolio company Clifford Capital
• Trade Keppel shares with an IG account

Keppel share price: what's the latest?

Keppel Corp shares rallied up to 2.5% on Monday morning (22 March 2021), after the company announced that a consensual transaction for the restructuring of its associate company Floatel has been agreed upon between Floatel and FELS Offshore Pte Ltd.

As at 14:50 SGT, shares have retreated slightly, and are trading at S$5.24 each.

The consensual transaction is substantially similar to the transaction described in the company’s announcement on 05 December 2020, except that the transaction will take place at Floatel itself, without the involvement of a new company or new company acquisition.

As part of the agreement, all subsidiaries of Floatel prior to the completion of the consensual transaction will remain owned by Floatel.

Next, FELS will retain its common shares in Floatel representing 49.92% of the total issued share capital of Floatel. A subordinated loan borrowed by Floatel from FELS in the amount of approximately US$244 million will also be forgiven.

Finally, Floatel has taken on a new super senior revolving credit facility (SSRCF) for a principal amount of up to US$100 million. The purpose of the credit facility is, among other things, to fund a cash redemption of new 1L bonds, and for Floatel group’s working capital and general corporate purposes.

The consensual transaction is expected to be completed on 24 March 2021.

1L bonds to be converted into US$230 million of new bonds

The 1L bonds will be converted into new 1L bonds issued by Floatel in an aggregate principal amount of US$230 million.

This will be split into 6% per annum senior secured US$115 million lien cash pay bonds 2021/2027 under which interest shall be paid in cash, and 10% per annum senior secured US$115 million first lien PIK pay bonds 2021/2027 under which interest shall be paid by issuance of additional bonds.

The 1L bonds will also be converted into common shares in Floatel representing 40.08% of the total issued share capital of Floatel.

Upon completion of the consensual transaction, Floatel will make a US$15 million cash redemption of the new cash pay 1L bonds, as well as a US$15 million cash redemption of the new PIK interest 1L bonds.

Additionally, 2L bonds will be converted into warrants with a ten-year term. They will convert into 12% of the post-conversion equity in Floatel, with a strike price based on an equity value of US$424 million.

Keppel Offshore & Marine Ltd has entered into a participation agreement with Temasek portfolio company Clifford Capital Pte Ltd, the lender under the SSRCF.

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