S&P: Vulnerable sectors in S'pore bond market

S&P Global Ratings said yesterday that several sectors in Singapore's bond market are vulnerable to "rising financial strain" after recent defaults.

Indonesian mobile phone distributor and retailer Trikomsel Oke Tbk defaulted last November, followed by Hong Kong-based industrial fishing company Pacific Andes Resources Development in January.

Last month, offshore oil and gas services Swiber Holdings defaulted on its local-currency notes, roiling the local bond market and becoming the third entity to renege on payments since November.

The oil services sector is the most vulnerable, while agriculture and commodities companies and some real estate companies may also face stresses ahead, the ratings firm said in a statement.

"In our view, smaller developers are more vulnerable than their larger peers to near-term market volatility often due to weak liquidity positions and sometimes unsustainable leverage levels," said S&P analyst Bertrand Jabouley in the statement. For commodity-related companies, liquidity remains fragile on declining earnings, he added.

S&P estimated that listed entities in Singapore have about $60 billion in bonds outstanding as of Sept 15.

Excluding all bonds issued by government-related entities, the amount is about $53 billion, according to the company. It said that real estate firms account for a little over half of the total.

Container throughput has shrunk 8.7 per cent last year as global trade slowed, while slumping crude prices have hurt firms that service the energy industry. While Swiber defaulted last month, Ezra Holdings said last week that it had held talks on potential fund raising. Sembcorp Marine and Keppel have reported slumping profits.

"The shipping and oil and gas space has really been a minefield in the bond market," said Mr Terence Lin, assistant director of bonds and portfolio management at fund researcher iFast. "One of the positives from this is that there'll be increased scrutiny on very levered companies, and a push for management to take corrective plans or pre-empt liquidation outcomes."

Rickmers Maritime will not be able to repay US$179.7 million (S$245.2 million) of senior debt due next March and the interest and principal on S$100 million of notes due in May, it said in a filing recently. Marco Polo Marine told some noteholders of its debt-delay plan at a meeting last Tuesday.

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A version of this article appeared in the print edition of The Straits Times on September 17, 2016, with the headline 'S&P: Vulnerable sectors in S'pore bond market'. Print Edition | Subscribe