Swissco to file for interim judicial management

An oil rig by Swissco Holdings, which will file for interim judicial management over the next few days.
An oil rig by Swissco Holdings, which will file for interim judicial management over the next few days. PHOTO: SWISSCO HOLDINGS LIMITED

Debt-laden firm's decision comes as main lenders reject its restructuring plan

Debt-saddled Swissco Holdings will file for interim judicial management over the next few days - the third energy-related firm here to take that option in recent months.

The decision comes as the main lenders have rejected the rig and vessel chartering group's debt restructuring plan, the firm told The Straits Times yesterday.

United Overseas Bank is Swissco's largest bank lender, followed by DBS Bank. Swissco carries $255 million of bank debt owed to seven lenders, which it had planned to pay off via asset sales and the conversion of debt to equity.

Swissco chief executive Tan Fuh Gih said by phone: "Due to the current circumstances, we're no longer able to operate as a going concern and are prepared to file for interim judicial management."

The firm is likely to report a huge net loss in the three months to Sept 30, owing to a $238 million impairment that came mainly from its idle drilling rigs and joint venture rigs. Swissco chairman Lim How Teck said the company is preparing its paperwork and will file it over the next few days.

NO OTHER ALTERNATIVE

Due to the current circumstances, we're no longer able to operate as a going concern and are prepared to file for interim judicial management.

SWISSCO CHIEF EXECUTIVE TAN FUH GIH

Swissco's collapse comes as the industry tackles frighteningly high debt levels amid the most brutal oil-price downturn in 30 years.

Swiber Holdings, with a market cap of $50.2 million, filed for judicial management in July. Technics Oil & Gas, with a market cap of $16.2 million, put in its court order earlier that same month.

Swissco has a market value of about $35.1 million. Its shares last traded at 5.2 cents on Oct 10 before trading was suspended. It also owes bond holders $100 million in principal that would have come due in 2018. Mr Lim noted that bond holders are likely to get very little in return when the company goes under judicial management, while shareholders can expect to get nothing.

But there could be some "silver lining along the way", he said, as one Chinese investor has expressed interest in making a fund infusion, given the latest write-downs.

Ultimately, it will be up to the judicial manager to decide if Swissco should be liquidated, or if it can be nursed back to health with an infusion from third parties.

Swissco riled investors when it said just days ahead of a scheduled $2.85 million bond coupon payment on Oct 16 that it had only US$1.2 million (S$1.7 million) in cash and no plan for its next course of action. Some disbelieving bond holders later requested that Swissco undergo a forensic audit going back two years, with costs to be borne by a third party. Swissco rejected this appeal.

Mr Lim said: "We are audited by KPMG and there is no evidence on the surface to show that there is anything wrong with the accounts."

A version of this article appeared in the print edition of The Straits Times on November 15, 2016, with the headline 'Swissco to file for interim judicial management'. Print Edition | Subscribe