Topaz Engineering, the offshore support vessels subsidiary of Oman's Renaissance Services, yesterday announced the refinancing of the first part of loans totalling US$330 million.
The refinancing of the first $203m comes after a difficult 2011, in which profit slumped, the company became embroiled in a fraud scandal, and a planned IPO on the London Stock Exchange was abandoned as a consequence.
Renaissance also suffered, with full-year profit of just $6m followed by disappointing first-quarter results of only 782,000 Omani rials. The refinancing allows Topaz's troubled OSV arm to pursue its expansion programme, and Topaz announced that $60m of equity has been freed up for investment.
While debt is still high, Topaz operates in a high-cost industry, where high levels of expenditure are vital for survival. "Their capex [capital expenditure] is on the higher side, which is usual for this kind of business," said Sameer Kattiparambil, an associate vice president at EFG-Hermes in Oman. "But looking at the profitability, we expect better results, especially in the second half of the year."
The company is well entrenched in markets in the Gulf and in the Caspian, and has a presence in Saudi Arabia, where offshore oil and gas production is growing. Some of its ventures, such as a move into Brazil, have been less successful so far, but break-even is within reach, said Topaz.
Analysts note that $60m is only a small step in an investment programme that exceeds $1 billion, while the initial plans to refinance $380m have been reduced. The failure to disclose the terms of financing could also indicate that borrowing had come at a significant cost, says one analyst.
Topaz may turn to Islamic financing for the second stage of its refinancing, a move that will open up new sources of funds, and potentially reduce costs.
There is also a more tantalising prize. The London IPO, out of reach so far, could be the next recourse to funding, if Topaz's fortunes are revived.
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