- Company faces $75 million of ‘immediate obligations’
- Warnings over financing date back almost a year
- Potential rescue offer depends on interim financing
Shares in oil services group Lamprell (LAM) cratered 80% to 4.6p after it warned it faced ‘severe liquidity constraints’ and wouldn’t meet its short-term obligations without emergency funds.
Specifically, the firm has $75 million of liabilities coming due this month and next month in the form of debt repayments, payrolls, capital spending and project and vendor payments.
BURNING THROUGH CASH
As well as its immediate funding needs, the firm said it had ‘material medium-term capital requirements and ‘debt-like’ items’ amounting to $164 million.
These include capital spending and maintenance on production lines, contributions to its joint venture with engineering group IMI (IMI) and pension obligations in the UAE.
The company is currently burning through cash at a rate of knots due to ‘an intensive working capital phase’ on rig projects for its joint venture partner IMI.
It has also committed to spending $55 million on a yard upgrade programme which it argues is ‘critical to delivering the group’s growth strategy in renewables’ by doubling its revenue capacity to between $800 million and $1.2 billion while lowering unit costs.
POTENTIAL WHITE KNIGHT
Blofeld Investment Management, which owns 25% of Lamprell’s shares, has approached the board with a possible offer to buy the firm in its entirety.
However, any offer would be ‘at a very significant discount to the prevailing share price and would need to include an interim funding solution or bridge financing’.
Blofeld has apparently been in talks with the company for more than two months already without reaching an agreement on price.
Meanwhile, the company has moved ever closer to the brink and now needs a major injection of cash to stay afloat.
NO BLACK SWAN
The firm has been warning for the last year it needed an injection of cash to keep going so today’s news shouldn’t really be a surprise to investors.
On 29 June 2021, Lamprell shares dropped 25% to 51p after it announced that despite an improvement in revenues and positive operating profits it required ‘a critical capital reorganisation’ in order to keep operating.
The company subsequently tapped shareholders, including Blofeld, Schroders (SDR) and Steven Lamprell, by placing nearly 68 million shares at 32p last October to raise around $30 million.
At the end of March, it announced it was delaying the release of its full year results to allow the board to ‘continue progressing potential financing and strategic options’.
At the time, the firm said it would release its audited report and accounts by no later than 30 June, but today’s trading update suggests that is no longer likely.
