Keppel, on the back of improving conditions in the offshore rig market, will secure control over the 13 legacy rigs held by Rigco Holding (Asset Co) following a selective capital reduction (SCR) exercise to be completed by Asset Co.
Keppel currently holds a 10 per cent equity stake in Asset Co, SG$139 million (US$104 million) in perpetual securities, and approximately SG$4.3 billion (US$3.2 billion) in vendor notes issued by Asset Co.
When the SCR exercise is successfully completed by end-2024, the shares in the capital of Asset Co not held by Keppel will be cancelled, resulting in Asset Co becoming a wholly-owned subsidiary of Keppel. Asset Co will be housed within a newly created private fund to be managed by Keppel.
With control over Asset Co, Keppel will be able to effectively manage when and how the legacy assets are monetised, with the goal of achieving the best risk-adjusted returns.
Keppel will also have control of SG$843 million (US$628 million) of cash in Asset Co as at end September 2024, which it can utilise to complete the unfinished rigs.
Keppel said it has no intention of re-entering the offshore and marine business. However, as the largest economic interest holder in Asset Co, Keppel remains focused on the monetisation of the legacy assets.
As part of the existing master services agreement, Seatrium will continue to provide construction, maintenance, and other associated services for the legacy rigs for an initial period of 10 years after the combination of Keppel Offshore and Marine (now known as Seatrium Offshore and Marine) and Sembcorp Marine (now known as Seatrium).
In line with its asset-light business model, Keppel plans to establish a new and dedicated private fund, the Keppel Offshore Infrastructure Fund, to own and manage the legacy rigs and its 49 per cent stake in Floatel as well as attract third party capital from limited partners and co-investors. This will provide Keppel with greater strategic flexibility to respond to market opportunities via directly managing the rig assets through the fund, while potentially earning asset management fees as a general partner of the fund.
The fund would also have the optionality of selling the rigs or exiting through a securitisation route in future.