Phoenix Petroleum Philippines Inc. said it plans to use its over P1 billion ($19.2 million) proceeds from the divestment of its investments in PNX Petroleum Singapore Pte. Ltd (PNX SG) for its working capital.
Phoenix said in a disclosure to the Philippine Stock Exchange Tuesday it would divest its investments from PNX SG through a share buyback.
PNX SG will buy back the shares owned by Phoenix in the company. Phoenix owns about 85 percent equity, while Libra Investments Pte Ltd. has 15 percent.
Phoenix is disposing 22.6 million shares equivalent to its entire 85-percent interest of the total outstanding shares of PNX SG for $0.85 per share.
“This transaction shall raise an immediate $19.2 million in cash for PPPI which can be utilized to meet the immediate needs of the business for working capital to purchase inventory for its B2B customers,” Phoenix said.
“The added working capital to be raised by the sale shall help push the recovery efforts of the local business, and together with its liability management exercise and any possible equity infusion, the same levels of revenue are expected to be attained in the 2 to 3 years along with an increase in margins,” it said.
PNX SG is a subsidiary of Phoenix engaged in the trading of petroleum products in the region. It derives its revenues through third-party sales aside from merely servicing primarily the supply needs of Phoenix.
“With the company’s Liability Management Exercise (LME), PNX SG sale is part of key enabler to support the needs of PPPI’s working capital. This is a self-help given the difficulty in raising additional working capital bank lines,” the company said.
Phoenix said the valuation was based on the net book value as of July 31, 2023, reduced by its outstanding receivables and the receivables of Phoenix LPG Philippines Inc. (PLPI), Phoenix Gas Vietnam (PGV) and Udenna Corp. totaling $20.2 million.
It said the transaction would also offset and settle the outstanding obligations of PLPI, PGV and Udenna amounting to $24.6 million.
Phoenix said the transaction would have no impact its business operations because the company has been sourcing its inventories from local suppliers since mid-2022.