Fear of contagion from the shock bid for the winding up and provisional liquidation of offshore services firm Swiber Holdings battered the stock market yesterday.
Banks and the oil and gas sector were among the biggest casualties.
Shares of DBS Group Holdings, Swiber's major banker, were hit hard as it had been backing a debt restructuring bid to help the firm weather a protracted offshore and marine sector downturn.
DBS shed 2.3 per cent, or 38 cents, to $15.88 as the Straits Times Index fell 0.78 per cent on the day.
Swiber's woes sent shockwaves through the oil and gas sector, as investors dumped what they perceived to be vulnerable counters.
Vessel charterer Vallianz Holdings fell nearly 42 per cent to a new low of 1.5 cents, following the move by controlling shareholder Swiber, which holds a 25.2 per cent stake. Some 307.6 million shares changed hands, making it the most hotly traded stock and sparking a Singapore Exchange query.
Responding, Vallianz cited the resignation of non-executive director and chairman Raymond Kim Goh, 48, - also Swiber's executive chairman - owing to "health reasons" and Swiber's move. But it said business is continuing as usual.
It will be "a long, harsh winter" for the oil and gas industry, already hit by a protracted price slump due to oversupply, an analyst said. "The market is selling ahead of possible fallout for all highly geared oil and gas companies."
DBS, which played a part in the refinancing of debts on Swiber's balance sheet, said it has total exposure of about $700 million to the Swiber group of companies.
"As the exposure is partially secured, DBS expects to recover half of it and will provide fully for the anticipated shortfall. DBS will tap on its surplus general allowances, and the net allowance charge will be lower at about $150 million," DBS said in response to media queries.
The balance sheet remains strong, with minimal impact on its capital adequacy ratio, DBS said.
OCBC Bank noted that it was not listed as a principal banker to Swiber in the firm's annual report. United Overseas Bank said its exposure was "manageable".
At least two oil and gas firms, whose stocks were ravaged yesterday, have sought to distance themselves from the contagion.
Swissco Holdings, whose stock tanked nearly 18 per cent to six cents, said its results will not be affected as it has no business dealings with Swiber. Ezion Holdings, which lost 8.7 per cent to 31.5 cents, made similar statements. Both noted that their business was in a different sector from Swiber's.