The Minister of Finance Inc (MOF Inc) is to pay a sum of RM190.15 million as working capital to the littoral combat ship (LCS) contractor Lumut Naval Shipyard Sdn Bhd (LNS) (formerly known as Boustead Naval Shipyard Sdn Bhd) via a share issuance exercise.
MOF Inc, which owns Ocean Sunshine Bhd (OSB) had initiated the pay out following Boustead Heavy Industries Corp Bhd (BHIC) — which owns a 20.77% stake in LNS via wholly owned Perstim Industries Sdn Bhd (PISB) — said LNS is to issue 240 million new shares to its existing shareholders, representing 185% of the shipbuilders’ share base, at RM1 per share.
In a bourse filing on Friday (Jan 26), it was found that OSB owns the remaining 79.23% in LNS. MOF Inc also holds a single special share in LNS.
“The proposed issue is undertaken by LNS with the intention to capitalise the shareholders’ advance by OSB for the purpose of the working capital of LNS,” the group said.
Under the share issuance exercise, 190.15 million shares will be issued to OSB for a consideration of RM190.15 million, while another 49.85 million shares will be issued to PISB at no cost.
According to BHIC, there is no consideration to be paid for the shares issued to PISB as the 49.85 million shares it is allotted will be transferred to OSB.
It is worth noting that OSB is in the midst of acquiring PISB’s 20.77% stake in LNS for RM1. The deal was initially inked in August last year and most recently had its deadline to fulfil conditions precedent extended for the fourth time this month.
However, as of LNS’ current shareholding and based on back-of-the-envelope calculations, the shipbuilder’s share issuance exercise will see OSB control 92.7% of LNS, while PISB’s stake will be diluted to 7.3%.
BHIC recently completed the issuance of new shares under its RM417 million debt settlement exercise, which was said to result in Boustead Holdings Bhd’s stake in the group rising to 72.38%.
The Armed Forces Fund Board (LTAT) took Boustead Holdings private in June 2023.
Govt Completes Acquisition
Looking at OSB’s 79.23% in LNS, according to BHIC’s filing, it is understood that the government-owned company has completed its acquisition of Boustead Holdings’ 68.85% stake in the shipbuilder. It had acquired the other 10.38% stake in LNS from LTAT.
LNS, the contractor of the troubled LCS project, bungled the national defence project resulting in cost overruns from RM6 billion to RM9.18 billion and later RM11.22 billion, while targeted deliveries of six vessels were reduced to five.
Based on the initial plan, the first vessel was supposed to be delivered over four years ago in 2019. Under the revised plan, the vessels were scheduled to be delivered in August 2026, April 2027, December 2027, August 2028, and April 2029.
As a result of the delays and ballooning costs, the government has stepped in to take over the project’s debt-laden main contractor LNS from its current shareholders, including Boustead Holdings and LTAT.
At the noon break on Friday, shares in BHIC stood one sen or 2.04% lower at 48 sen, valuing the company at RM270.85 million.
