Thu, Aug 22, 2019 – 8:35 PM
OFFSHORE and marine equipment dealer KTL Global on Thursday said it has agreed to sell its wholly-owned subsidiaries, KTL Offshore and KTL Investment, to Teck Leong Pte Ltd, a company controlled by the family of KTL Global’s executive chairman Tan Tock Han, for S$10,000.
Mr Tan and his family are also controlling shareholders in the company.
The consideration is at a premium to the target companies’ net tangible asset value (NTA) of negative S$18.9 million, based on its latest Q2 2019 unaudited consolidated financial statements.
KTL Offshore is engaged in trading rigging equipment and other related services, while KTL Investment is in the business of investment holding.
KTL Global said it is doing this because both subsidiaries have been loss-making in recent years since 2016, due to challenging conditions in the oil and gas industry.
Cost-cutting measures did little to help. The group expects the oil and gas industry to remain challenging due to an oversupply of goods and service providers and fluctuating oil prices.
It had explored other business opportunities to improve its revenue stream and financial position, and even entered into a joint venture with a partner to invest in Bluegas Pte Ltd, which is now an 80-per-cent subsidiary of the company. Bluegas provides branding, technical, operation and procurement services.
Furthermore, as at Q2 2019, the amount of loans, liabilities and borrowings owed by KTL Offshore to banks and the purchaser as well as the Tan family totalled more than S$42 million.
It would be very difficult for the group to make repayment of these amounts should the creditors call on the debt, and this would increase the strain on the group’s financial resources, it said.
As at Q2 2019, the group is also in a negative NTA position, and a proposed disposal would result in a positive NTA for the group.
Both the company and purchaser have agreed to do all that may be required to discharge any existing corporate guarantees previously executed or extended by the company to banks in connection with the subsidiaries’ bank borrowings.
“Upon completion of the proposed disposal and the discharge of such corporate guarantees, the group will have nil bank borrowings,” it said.
“In view of the above, the company notes that the proposed disposal is beneficial to the group’s continued development and operations as it will result in a substantial reduction in losses, a significant lowering of liabilities and a cash inflow.”