Bumi Armada agrees to sell three ice-class vessels to Russian player

Malaysian offshore vessel provider Bumi Armada has revealed that its wholly-owned subsidiaries have arranged to sell three ice-class vessels to Russia’s Lukoil for $44.5 million.

Bumi Armada announced on Wednesday that its three wholly-owned subsidiaries – Bumi Armada Singapore Holdings, Bumi Armada Offshore Contractor, and Bumi Armada Russia – had entered into a sale and purchase agreement with Lukoil’s wholly-owned indirect subsidiaries – AC Management and K.N Holding – for the divestment of the entire issued and paid-up share capital of Bumi Armada’s wholly-owned indirect subsidiaries – Bumi Armada Marine Uray, Bumi Armada Marine Pokachi, Bumi Armada Marine Naryan Mar and Bumi Armada Marine – collectively called the Ice Class Vessel Companies.

Bumi Armada Marine Uray, Bumi Armada Marine Pokachi, and Bumi Armada Marine Naryan Mar were incorporated in Singapore on 21 May 2015, with the principal activity of ship owning, chartering and managing ships and vessels, and the provision of marine support and other services to offshore oil and gas companies. On the other hand, Bumi Armada Marine was incorporated in Russia on 21 August 2014, with the principal activity of providing marine support and other services to oil and gas companies.

Bumi Armada informed that based on the interim financial statements for the nine-month financial period ended 30 September 2021, the Ice Class Vessel Companies had recorded a combined loss after taxation of RM56.6 million (over $13.5 million). They have combined net assets – including capital contribution – of RM219.9 million (over $52.5 million).

The stake in these indirect subsidiaries is expected to be sold for a total cash consideration of $44.5 million – equivalent to approximately RM186.6 million – subject to adjustment in accordance with the terms of this deal. Upon completion of the transaction, the Ice Class Vessel Companies will cease to be part of the Bumi Armada Group.

Furthermore, Bumi Armada explains that the Ice Class Vessel Companies own the Bumi Uray, Bumi Pokachi, and Bumi Naryan Mar vessels, which have been working for Lukoil-Nizhnevolzhskneft in the Caspian Sea, Russia, since 2016 under three charter party contracts.

The latest deal for the sale of the entire stake in the Ice Class Vessel Companies is in line with Bumi Armada Group’s strategic plans and intention to exit the offshore marine services business. The deal will also generate cash flow, enabling the company to repay and reduce its corporate debt while redeploying and focusing its resources on its core activities.

The firm further elaborates that the proceeds received from the sale are expected to be fully utilised within three months after they are received with approximately $38 million used to reduce Bumi Armada’s corporate debt whilst the remaining proceeds amounting to approximately $6.5 million will be retained for working capital purposes.

In addition, the sale is expected to result in a loss on disposal of subsidiaries of approximately RM25 million (around $5.9 million) to the Bumi Armada Group. The deal is expected to be completed by the end of the first quarter of 2022.