Sale of fixed rate junior mortgage-backed bonds due 2009 issued by Chenab Investments Ltd
The Board of Directors of SembCorp Marine (the Company) wishes to announce that it has sold all its Fixed Rate Junior Mortgage-Backed Bonds (Junior Bonds) issued by Chenab Investments Ltd to Neptune Orient Lines Limited at $54.28 million.
The sales consideration of $54.28 million was based on the outstanding principal of the Junior Bonds as at September 1, 2004 at $59.28 million less $5.0 million. The valuation of the Junior Bonds at $54.28 million is in line with that provided by DBS Bank. The proceeds from the sale will be used as working capital for the group.
Chenab Investments, owner of the NOL Building at No. 456 Alexandra Road, Singapore, issued the Bonds in 1999 to purchase the building which was then valued at $185 million. The Bonds issued comprised the Senior Bonds at $125 million and the Junior Bonds at $60 million.
SembCorp Marine purchased the Junior Bonds in March 1999 with a bond yield ranging from 7.25% to 7.5% per year and maturity date in 2009. The income from the investment in the Junior Bonds from 1999 to August 30, 2004 is $19.0 million after netting the disposal loss of $5.0 million. Had the same amount been placed in Fixed Deposits with interest rate ranging from 0.075% to 1.663%, the interest income would only be $4.5 million. The rationale to sell the Junior Bonds at this stage instead of holding till maturity date is to eliminate the risk of exposure to the valuation of the property.
The Audit Committee has reviewed and satisfied that the sale of the Fixed Rate Junior Mortgage-Backed Bonds was carried out on normal commercial terms and in the best interests of the Company.
The directors of the Company do not have any interest in this transaction. The above transaction is not expected to have a significant impact on the net tangible assets per share of SembCorp Marine for the financial year ending December 31, 2004.
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