15 March 2014

Ezion issued S$55M 5.10 per cent. notes due 2020

Ezion Holdings Limited (the “Issuer”) is pleased to announce that it has issued S$55,000,000 5.10 per cent. notes due 2020 (the “Series 006 Notes”) under its S$500,000,000 multicurrency debt issuance programme (the “Programme”). The Programme was established on 9 May 2012. The Series 006 Notes will bear interest at 5.10 per cent. per annum and will mature on 13 March 2020.

The net proceeds of the Series 006 Notes will be used by the Issuer for general corporate purposes, including the financing of investments in offshore and marine assets and general working capital of the Issuer or its subsidiaries.

My Notes

This is the sixth round (which I believe is the last round) Ezion holdings issued the notes under S$500 multicurrency debt issuance programme started on 9 May 2012. Below is the summary of the various notes issued during this two years period:

20140314 - S$55M interest rate 5.10%
20140123 - S$50M interest rate 4.85%
20130820 - S$60M interest rate 4.6%
20130522 - S$110M interest rate 4.7%
20120905 - S$125M interest rate 7.8%
20120522 - S$100M interest rate 5.25%

As mentioned by the management, the proceeds would be mainly used for financing of investments in offshore and marine assets as well as served as working capital. As the interest rates of the debts range within 4.6% and 7.8%, I believe the weighted average capital cost  Ezion would be easily lesser than 10%. As most of the projects would yield more than 10% net ROI, so I believe that the net book value of Ezion could be strengthened accordingly and it is not surprised to see that Ezion is trading around 2 times above book value.

Based on my own understanding, most of the newly taken projects of lifeboat services would be financed at 30% Equity: 70% Debt basis, so it could explain why the total debt ratio of Ezion could be at this high level. As long as the interest coverage ratio is still in healthy level, I still think Ezion is a good opportunity to invest provided the oil & gas market still in a good shape (crude oil price always above US$90 per Barrel level).

We have to monitor the progress of U.S. shale oils as some claimed that U.S. to be top oil producers. As far as I am concerned, Ezion did make it as leader in niche industry and I am happy to see it to evolve to be a bigger player in the region. 

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