Even after five years of its highly leveraged buyout of Sinvest, debt-laden Aban Offshore is not fully out of
the woods yet as its operating cash flows fall short of its debt repayments. The company actually ended FY12 with higher debt compared to the year-ago period, according to its consolidated balance sheet. In the background of a tepid June ’12 quarter, some action towards deleveraging or higher charter rates for its rigs will boost the scrip.
While Aban Offshore has brought down its debt-equity ratio from 20.4 at FY07 end, it still remains high at 4.1 at March ’12 end. The company has been paying more than half of its EBITDA towards interest on loans ever since. Heavy interest outgo means the company has less cash left to repay its debts. This means it needs to refinance its maturing debt by raising more debt. Aban’s consolidated debt grew 16% y-o-y to . 11,701 crore.
Higher cost of refinancing has also taken its toll on Aban’s financial performance as its interest charge at . 312 crore increased 42.8% yo-y. Emkay’s report on the quarterly results mentioned higher coupon rate for Aban’s refinanced bond issues — first bond issued at a coupon rate of 12% and the second bond redemption at a coupon of 14.25% vs earlier 9.3% — as a key reason. The net profit for the quarter was down 41.1% to . 52.1 crore.
The company is hoping for external commercial borrowings to refinance its domestic loans at substantially lower rates. Similarly, it has enabled its board to raise up to $400 million by issuing equity or quasi-equity instruments. However, considering the current market conditions, this is unlikely to mean much.
Now, a lot will depend on the company’s ability to secure long-term deals for rigs, improve utilisation rates and ensuring higher rates. Its FY12 show remained subdued as three of its vessels remained off-stream for an upgrade.
The company appears optimistic about its future. “We expect to have all our rigs deployed through FY13 (except FPU Tahara) at relatively attractive rates across fairly long tenures, which should translate into revenue and profit predictability,” said its MD Reji Abraham in the annual report.
the woods yet as its operating cash flows fall short of its debt repayments. The company actually ended FY12 with higher debt compared to the year-ago period, according to its consolidated balance sheet. In the background of a tepid June ’12 quarter, some action towards deleveraging or higher charter rates for its rigs will boost the scrip.
While Aban Offshore has brought down its debt-equity ratio from 20.4 at FY07 end, it still remains high at 4.1 at March ’12 end. The company has been paying more than half of its EBITDA towards interest on loans ever since. Heavy interest outgo means the company has less cash left to repay its debts. This means it needs to refinance its maturing debt by raising more debt. Aban’s consolidated debt grew 16% y-o-y to . 11,701 crore.
Higher cost of refinancing has also taken its toll on Aban’s financial performance as its interest charge at . 312 crore increased 42.8% yo-y. Emkay’s report on the quarterly results mentioned higher coupon rate for Aban’s refinanced bond issues — first bond issued at a coupon rate of 12% and the second bond redemption at a coupon of 14.25% vs earlier 9.3% — as a key reason. The net profit for the quarter was down 41.1% to . 52.1 crore.
The company is hoping for external commercial borrowings to refinance its domestic loans at substantially lower rates. Similarly, it has enabled its board to raise up to $400 million by issuing equity or quasi-equity instruments. However, considering the current market conditions, this is unlikely to mean much.
Now, a lot will depend on the company’s ability to secure long-term deals for rigs, improve utilisation rates and ensuring higher rates. Its FY12 show remained subdued as three of its vessels remained off-stream for an upgrade.
The company appears optimistic about its future. “We expect to have all our rigs deployed through FY13 (except FPU Tahara) at relatively attractive rates across fairly long tenures, which should translate into revenue and profit predictability,” said its MD Reji Abraham in the annual report.
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