MARCH 14 — The Economic Times (ET) defines “bailout” as a general term for extending financial support to a company or a country facing a potential bankruptcy threat.
It can take the form of loans, cash, bonds, or stock purchases. A bailout may or may not require reimbursement and is often accompanied by greater government oversight and regulations.
The reason for the bailout is to support an industry that may be affecting millions of people internationally and could be on the verge of bankruptcy due to prolonged financial crises.
The ET also describes the various forms of bailout – the most common being direct loans or guarantees of third-party (private) loans to the rescued entity.
The government or the financing body will place strict requirements such as restructuring of organisation, no dividend payment to shareholders, change of management and in some cases a cap on salaries of executives till a stipulated time period or the repayment of dues.
An undated photograph shows Sapura Energy’s Lumut fabrication yard. — Sapura Energy pic
If you call a spade a spade, then the government’s move to inject RM1.1 billion into Sapura Energy Bhd is but a bailout.
It’s not that bailouts are without their supporters. According to the ET, there are at least two advantages to bailouts.
First, they ensure continued survival of the entity being rescued under difficult economic circumstances.
Second, a complete collapse of the financial system can be avoided, when industries too big to fail start to crumble. The government in these cases steps in to avoid the insolvency of institutions that are needed for the smooth functioning of the overall markets.
If the injection of the fund is a loan to the oil and gas (O&G) company to be used “exclusively and directly” to repay the company’s local vendors, then it is hoped that Sapura Energy can be like German energy company Uniper, which said on Thursday (March 13) that it has paid back around €2.6 billion (RM12.4 billion) to the German government after the bailout during the energy crisis in 2022.
The payment was made on Tuesday (March 11), the company said. It had announced the amount two weeks ago, which was about €100 million higher than previously expected.
So, be like Uniper, Sapura.
* This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.
