Sembcorp Industries to Provide S$2 Billion Subordinated Loan Facility to Sembcorp Marine to Better Position for Offshore and Marine Industry Recovery

Sembcorp Industries issues S$1.5 billion bonds to DBS Bank as Sole Lead Manager

Singapore, June 21, 2019

Sembcorp Industries and Sembcorp Marine today announce that Sembcorp Industries is providing Sembcorp Marine with a five-year subordinated loan facility (Subordinated Loan) of S$2 billion which will strengthen Sembcorp Marine’s financial position amidst the current downturn in the global offshore and marine industry. Sembcorp Marine will be using the Subordinated Loan to retire approximately S$1.5 billion of borrowings, and the balance S$500 million for working capital and general corporate purposes.

Sembcorp Industries, Sembcorp Marine’s largest shareholder, will issue S$1.5 billion of bonds (Bonds) to DBS Bank as Sole Lead Manager and initial purchaser (Lead Manager) through a private placement. The investors of the Bonds include Temasek. The terms and conditions of the Bonds are in line with Sembcorp Industries’ existing medium term note programme. Sembcorp Industries will utilise the proceeds from the Bonds to fund S$1.5 billion of the Subordinated Loan (which will be interest-bearing) to Sembcorp Marine, with the balance S$500 million to be funded by Sembcorp Industries’ existing available resources and facilities.

Assuming the S$2 billion is fully drawn as at March 31, 2019, Sembcorp Group’s gross debt-to-capitalisation ratio would increase from 56% to 58%.

Since 2009, Sembcorp Marine has made substantial strategic investments in yard and engineering capabilities, and acquired new technologies which allow it to offer diversified solutions across the offshore, marine and energy industries. For the 15 years prior to the current industry downturn which started in 2014, Sembcorp Marine delivered strong and consistent performance. It was profitable every year with cumulative net profit of approximately S$5.4 billion and distributed cumulative dividends of about S$3.5 billion. However, Sembcorp Marine’s current financial performance and position have been affected by the prolonged and severe downturn of the global offshore and marine industry. While the offshore and marine industry has shown signs of recovery, such recovery is expected to be gradual and sustained new orders for Sembcorp Marine will take time to materialise. Working capital needs have also increased especially for major engineering, procurement and construction projects. Sembcorp Industries and Sembcorp Marine believe that this financing will strengthen Sembcorp Marine, a key subsidiary of Sembcorp Industries, and better position it for the eventual recovery of the industry. The respective Board of Directors of Sembcorp Industries and Sembcorp Marine have considered a wide range of options and decided that the proposed financing option would be in the best interests of the companies.

The issue of the Bonds to DBS Bank as Sole Lead Manager does not constitute an interested person transaction for Sembcorp Industries. However, as investors of the Bonds include Temasek, in the interest of good corporate governance, the issue of the Bonds has been approved by the Board of Directors and the Audit Committee of Sembcorp Industries in accordance with the procedures set out in Sembcorp Industries’ mandate for the approval of the issuance of debt securities to interested persons of the Sembcorp Industries Group.

The Subordinated Loan constitutes an interested person transaction for Sembcorp Marine which falls within Sembcorp Marine’s mandate for interested person transactions (SCM IPT Mandate). The Subordinated Loan has therefore been approved by the Board of Directors and the Audit Committee of Sembcorp Marine in accordance with the procedures set out in the SCM IPT Mandate for the approval of borrowing of funds from interested persons by the Sembcorp Marine Group.

Sembcorp Marine press release