To better understand Penguin's proposed $10m investment in MPM, it is useful to go through the following -
(1) Penguin's announcement dated 8Nov17
http://infopub.sgx.com/FileOpen/PIL-%20M...eID=477306
(2) MPM's announcement dated 8Nov17
http://infopub.sgx.com/FileOpen/MPML_Upd...eID=477297
(3) MPM's latest Info Memo (prepared in conjunction with the consent solicitation exercise for the $50m 5.75% fixed-rate notes)
http://infopub.sgx.com/FileOpen/MPML_CSS...eID=475056
(4) Penguin's 3Q result
http://infopub.sgx.com/FileOpen/Penguin_...eID=477181
It is to be noted that:
(I) Together with 8 other investors (including Super Group's founder David Teo ($20m), Yanlord Land Group's founding Chairman/CEO Zhong Sheng Jian ($10m), Soilbuild Construction Group's co-founder/Executive Chairman Lim Chap Huat ($5m), Chua Family behind Goldbell Group ($5m), and Vibrant Group ($5m) and 3 other parties), Penguin's proposed $10m investment (of which $2m is for account of Penguin's Executive Chairman Jeffrey Hing) in 357,142,857 new MPM shares at $0.028/share is subject to the completion of stringent Conditions Precedent and Termination conditions, including the requisite approvals for the Debt Restructuring Exercise by all relevant creditors (banks, other financial institutions, bond holders, trade/other creditors) which will have to accept a substantial hair-cut on their amounts owed and convert the remaining amounts into new MPM shares at $0.035/share, and High Court's requisite court orders to sanction the debt restructuring. So the proposed $60m new equity fund raising by MPM is NOT automatic. Assuming everything goes according to plan, Penguin will end up having an approx. 10% interest in the revamped MPM which is supposed to have not more than $12m in remaining debts (reduced from $248m as at 30Jun17) - i.e. MPM would have successfully taken out the untenable debt burden and pressure from lenders/creditors, and should be able to focus on rebuilding its business.
(II) The Info Memo details MPM's assets, and indeed MPM has substantial operating assets, including a well-established medium-size shipyard in Batam and 104 marine vessels of various kind. As most of the vessels were built my its own shipyard, conceivably their recorded NBV may even be conservative. Based on MPM's 31Mar17 B/S, group total assets stood at $439.7m...
http://infopub.sgx.com/FileOpen/MPML_H1F...eID=453622
Mainly driven by the great uncertainty surrounding the debt restructuring exercise just before 30Jun17, MPM's BOD decided to make substantial impairment on the group's assets, and in the 30Jun17 B/S, group total assets was written down to only $124.3m...
http://infopub.sgx.com/FileOpen/MPML-%20...eID=467059
Assuming MPM is successfully revamped, it is conceivable that the BOD will have to consider reversing at least a portion of the huge $315.4m asset impairment taken, so that the true and fair value of the group assets is more reasonably reflected in its B/S.
(III) Apart from entering into it at a attractive price - based on MPM's large asset base and a more realistic valuation of its assets after a successful financial revamp - Penguin's proposed investment in the revamped MPM also carries some strategic considerations. The 2 groups are complimentary in products and markets, and certainly MPM can learn from Penguin's prudent financial management, and fleet marketing and management. Penguin can easily fund the entire proposed $10m investment amount by tapping its $36m ($32.2m, if excluding $3.8m outstanding debts) cash reserve as at 30Sep17, which should remain healthy and may even rise further as and when any of its $30.5m trade debtors and other receivables (comprises a substantial amount related to fleet vessel sale under deferred payment arrangement) is settled.
Overall, it looks like Penguin has gotten a good deal that is likely to even grow in value and business opportunities.