SP Group firm to raise $1 billion to repay debt, fund India operations

Singapore-based Armada 98/2 Pte, a company 70 per cent owned by Shapoorji Pallonji Group (SP Group) and 30 per cent by Bumi Armada Berhad, is tapping into international markets to raise up to $1 billion. The proceeds will be used to repay old debt and fund India operations, informed banking sources.

The company had earlier raised about Rs 6,600 crore from Indian banks to finance its charter operations off the coast of Andhra Pradesh to Indian oil major Oil and Natural Gas Corporation (ONGC).

The loans will have maturities between 7 years and 10 years, said bankers.

“Armada has an existing construction loan for floating, production, storage, and offloading (FPSO) vessels contracted to ONGC. The existing loan needs to be taken out and, accordingly, a new project finance loan will be in place," said a source.

“The FPSO has reached the designated location in the KG basin. It is in a state of readiness, awaiting test after the first oil production by ONGC. After receiving confirmation from ONGC, a new loan can be drawn down,” the source added.

Armada 98/2 Pte was set up as a joint venture to provide offshore marine oil and gas services in response to ONGC’s KG-DWN 98/2 tender.

The company signed a lease contract with ONGC for nine years from the date of commencement of operations with the option to extend the charter period by another seven years.

An email sent to SP Group did not invite any response until the time of going to press.

According to the contract, the cash flow of the company is fixed for nine years at $609,200 per day. ONGC will bear the economic risks of all gas fields.

Of the total project cost of $1.17 billion, the promoters have invested $240 million; the rest raised as debt.

In March 2016, ONGC approved an investment of $5 billion for Cluster 2 development off Andhra. Armada 98/2 Pte won the tender for the charter hiring of an FPSO vessel to support the block KG-DWN 98/2 development project cluster.

SP Group is in the middle of an extensive restructuring exercise under which its construction and real estate companies are separated from the flagship and promoters owning direct stake in them.

The family flagship and construction giant, Shapoorji Pallonji & Company (SPCPL), had repaid bank debt worth Rs 11,000 crore by hiving off its stake in Eureka Forbes, Sterling and Wilson Renewable Energy, and SP Jammu Udhampur Highway.

The group has proposed to simplify its business structure, with SPCPL operating as a construction company on the lines of Larsen & Toubro, while moving the holding company operations to other entities.

In the past, SP Group raised funds by pledging stake in the holding companies that own Tata Sons shares. Since Tata Sons shares are illiquid, it is challenging for SP Group to pledge Tata Sons shares directly.

Media reports said SP Group plans to raise up to $1.25 billion by pledging additional shares in Cyrus Investments — a holding company.

Cyrus Investments owns a 9.2 per cent stake in Tata Sons.

The group is also planning to carve up the stake of Cyrus Investments between Cyrus Mistry’s widow and sons.

Payback time

• Armada 98/2 Pte had raised Rs 6,600 cr from Indian banks to fund its operations off the coast of Andhra Pradesh to ONGC
• The company signed a lease contract with ONGC for nine years
• According to the contract, the cash flow is fixed for nine years at $609,200 per day  
• Of the total project cost of $1.17 billion, the promoters have invested $240 million; the rest raised as debt