Ezra Bankruptcy Adds to Singapore’s Sorry Offshore Marine Story

Photo credit: Ezra Holdings

By Aradhana Aravindan and Anshuman Daga

SINGAPORE, March 20 (Reuters) – Oilfield services provider Ezra Holdings Ltd’s decision to file for U.S. bankruptcy protection gave investors another cause for concern on Monday as its downfall added to troubles in Singapore’s offshore marine sector.

Ezra is one of several marine firms hit by a downturn in oil prices since 2014 that has forced many to restructure debt and cut costs in a battle to stay afloat.

Industry peers Swiber Holdings Ltd and Swissco Holdings Ltd have already sought refuge in court, while auditors have questioned the future of Nam Cheong Ltd .

“No, (the pain) is not over yet,” said CIMB analyst Lim Siew Khee, who expects one to two more firms to default on debt in the next two years.

In response, Singaporean banks – including Ezra creditors DBS Group Holdings Ltd and Oversea-Chinese Banking Corp – have been preparing for casualties.

“We have been stress testing this sector since the third quarter of 2015, and in the process identified a list of customers that could be negatively impacted,” OCBC said in a statement on Monday.

OCBC said it had created specific provisions and additional general provisions for potential further deterioration in its oil and gas-related portfolio. It declined to identify specific customers.

DBS in a statement said, “Our exposures to Ezra Holdings were moved to non-performing in the third quarter, and suitable provisions have been made.”

The Ezra news sent Singapore’s oil and gas share index down as much as 1 percent on Monday before it recovered some ground.

DEFAULT

Ezra, whose debt includes $272 million in unsecured loans owed to DBS and $184 million to OCBC, filed for U.S. Chapter 11 on Saturday along with two affiliates, saying it was unable to pay debts on time.

The company has been flagging difficulties for the past few months. Its subsea services affiliate Emas Chiyoda Subsea Ltd filed for bankruptcy earlier.

“(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. “At this point in time we have no knowledge of how much of the assets could be written down.”

Ezra’s bankruptcy filing showed at least a dozen creditors have considered taking action against Ezra and its affiliates.

“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.

When a company files for Chapter 11, it can apply to the court to reject highly burdensome on-going contracts that do not fit into the debtor’s long-term business plans and which cannot be restructured to do so – something typically not possible under current Singapore law, Lee said.

RESTRUCTURING

Ezra’s filing for bankruptcy protection would be another blow to bondholders in Singapore where several firms, including shipping trust Rickmers Maritime and Perisai Petroleum Teknologi Bhd, are trying to restructure debt.

In contrast to European and U.S. bond markets, which are dominated by institutions, Singapore has a large base of individual investors. These individuals have increasingly been teaming up to seek better terms in restructurings.

The Singapore Exchange said it would aid the 373 holders of Ezra’s S$150 million ($107 million) notes due 2018 , which have been trading at distressed levels since December. Ezra said it would meet noteholders as soon as is practicable.

Trading of shares in Ezra, which has a market value of $23 million, was suspended on Monday. The stock has lost $1.5 billion in value since peaking in 2007. Trading of shares of shipbuilder Triyards Holdings Ltd, 60 percent owned by Ezra, was also halted.

Nam Cheong stock was down 26 percent. ($1 = 1.3975 Singapore dollars) (Reporting by Aradhana Aravindan and Anshuman Daga; Additional reporting by Umesh Desai; Editing by Christopher Cushing)

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