24-02-2018

Rescued Singapore Shipbuilder Buckles Under Debt Woes

A Singapore shipping company rescued by its chairman just over a year ago faces collapse unless the courts step in, a sign that an earlier slump in oil prices is still reverberating.

Saddled with $877 million in liabilities and creditors demanding payment, Otto Marine Ltd. is asking the Singapore High Court for protection. The shipbuilder wants to turn itself around under the court’s supervision and fend off creditors while it restructures its debt, according to its Feb. 20 application for judicial management, which was obtained by Bloomberg News.

“I cannot be expected to continue shouldering the financial burden and injecting fresh capital into the company,” Executive Chairman Yaw Chee Siew said in the application.

Yaw, took full control of the ailing firm in October 2016 and is the single biggest creditor with $208 million due to him and affiliates, the papers show. The financial collapse of the group is imminent unless the High Court provides breathing room, he said.

Otto Marine made its case for an interim judicial manager in a closed door hearing on Friday. “The company will release a statement after the outcome of the hearing is known,” Mark Ortega, legal counsel, said in an email on Thursday.

Oil and Gas Struggles
The shipping company is among many in the oil and gas services industry struggling to meet financial obligations after a plunge in crude prices caused contracts to dry up. At least $15 billion of bonds and loans have fallen into distress in Southeast Asia in the past five years, according to data compiled by Bloomberg, and Otto Marine and peers including Swiber Holdings Ltd., Ezion Holdings Ltd. and Ezra Holding Ltd. contributed almost half of the amount.

The tumble in oil prices has pushed at least 134 North American oil producers into bankruptcy since 2015, according to Dallas-based law firm Haynes & Boone LLP. That pace has slowed as prices rallied about 50 percent from a bottom in 2017.

Otto Marine had $869 million in assets at the end of last year, and most of them are unlikely to be recovered in full, according to the court papers. The firm will probably survive for another two months based on its cash reserves, Yaw said in the filing. It has hired law firm PRP Law LLC and intends to appoint a judicial manager from KordaMentha Pte, the filing shows.

Yaw is a scion of the family that controls Malaysian timber giant Samling Group and also runs luxury-car dealerships in Hong Kong and China. He is the founding chairman of Perdana Parkcity, a closely held developer of a sprawling township outside Kuala Lumpur, according to data on the company’s website.

Otto Marine, established in 1979, has secured a letter of intent from an unidentified party willing to invest in the firm if certain conditions are met, Yaw said in the court papers.

“There is a reasonable probability of rehabilitating the company,” Yaw said in the papers, adding that the oil and gas market is slowly recovering.

Source: Bloomberg

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