Default Fears Resurface Over Singapore's Looming Debt Wall

Marco Green
March 31, 2017

SINGAPORE, March 20 Oilfield services provider Ezra Holdings Ltd's decision to file for US bankruptcy protection gave investors another cause for concern on Monday as its downfall added to troubles in Singapore's offshore marine sector.

OCBC said it had repeatedly highlighted that though the problem in the oil and gas sector in its portfolio had not broadened, it had deepened.

In February, EMAS Chiyoda Subsea, which is part owned by Ezra Holdings, was placed under bankruptcy, owing creditors around US$966 million.

A DBS spokesman said the bank had moved the loans of Ezra and Emas Chiyoda into non-performing loans in previous quarters and "suitable provisions have been made".

By filing for reorganization under Chapter 11 of the USA bankruptcy code, Ezra is seeking a moratorium on payments to creditors and to prevent them from seizing its assets, while allowing existing managers to work out a debt repayment plan under the court's supervision.

The FTSE ST oil and gas index fell as much as 1.4 per cent, while the broader market was down 0.2 per cent. Ezra shares were suspended from trading on Monday. "There would be a knee-jerk reaction in the shares of Ezra and related sectors".

"(Ezra is) a sizeable company with a huge amount of assets and liabilities", said Terence Lin, assistant director of bonds and portfolio management at online financial products distributor iFAST Corp.

"The group needs to seek legal shelter to pre-empt inundations of litigations from its debtors", said Robson Lee, a Singapore-based partner at Gibson, Dunn & Crutcher LLP.

Default fears are resurfacing in Singapore ahead of a wall of maturing corporate debt, as a US bankruptcy filing by a firm from the city flags lingering pain despite economic recovery.

"The Ezra Chapter 11 filing is meant to optimise the scope and extent of the restructuring options available and to protect the interests of all stakeholders of the company, including its creditors and shareholders, from hostile actions that could harm the company and its stakeholders by diminishing the group's value", according to the statement.

In contrast to European and US bond markets, which are dominated by institutions, Singapore has a large base of individual investors.

Shares in DBS closed at S$19.01, a 0.68 per cent fall from the previous trading day's close of S$19.14. Ezra Holding's 20 largest creditors without collateral securing their claims are said to be owed approximately US$607.6 million.

The group's yard operating arm Triyards Holdings, the last of its three Singapore-listed units still trading last week, had also requested a trading halt.

Other reports by Click Lancashire

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