AusGroup’s recent move to capitalise its debt will alleviate its high interest burden and lift it out of a negative gearing situation. The move puts it in a better position to raise funds to develop its operations at Port Melville beyond woodchip export into a marine supply base.
On 21 May, AusGroup said it is issuing new ordinary shares at 5.8 cents each, which was 6.62% above the market price, in exchange for its outstanding debt issue of S$110 million of 7.95% Notes due 2018.
|52-week range||3.5c - 7.5c|
|Source: Bloomberg / Company|
If fully taken up, the capitalization of the 7.95% Notes stands to reduce its interest expense by a whopping S$8.75 million a year.
It is also capitalising a shareholder loan from Ezion Holdings that amounts to US$5.903 million (about S$8.2 million).
AusGroup acquired Port Melville from Ezion through the issuance of 92.2 million new shares at 44.49 cents apiece at the end of 2014 (total value of S$41m). The acquisition gave Ezion a 17.8% stake, and made it the largest shareholder of AusGroup.
Port Melville has a fuel tank farm with a capacity of 30 million litres and is being developed to support LNG projects. The port is the only gazetted natural deep water international port in Northern Australia.
Turning equity and profitability to the black
AusGroup breached covenants on its major debt facilities in the past year. It had negative total equity of S$7.3 million and negative gross gearing of 24.8 as at 31 March 2017, casting doubt on whether it can service its debt, and whether it is sustainable as a going concern.
“The Group's restructuring through our core projects in the Northern Territory and Western Australia oil & gas sector, especially in the provision of LNG services, has positive results.”
- Eng Chiaw Koon
If it had restructured its debt as at 31 March 2017, its total equity would hypothetically have been S$28.8 million with a gross gearing of 5.1.
It posted a significant net loss after tax of A$258.9 million for FY2016 (year-end June). Its current liabilities exceeded current assets by A$115.2 million and its total liabilities exceeded total assets by A$14.9 million.
After restructuring its businesses, the Group reported a small profit after tax from continuing operations of A$660,000 for 9MFY2017. This is a significant improvement from the loss after tax from continuing operations of A$78.99 million for 9MFY2016.
Together with the profit after tax from discontinued operations, the Group recorded total profit after tax of A$2.21 million for 9MFY2017.
If it had restructured its debt as at 31 March 2017, its 9MFY2017 net profit attributable to shareholders would hypothetically have been S$4.6 million.
AusGroup is seeking shareholders’ approval for its debt capitalisation at an EGM on 29 June 2017.