Offshore marine giant Ezra Holdings has filed for Chapter 11 bankruptcy protection in the United States, amid the most crushing oil industry downturn since the 1980s.
Ezra, which rode on debt-fuelled growth until oil prices crashed in 2014, has been trying to restructure. So the moratorium on creditors' claims afforded under Chapter 11 will give it more headroom and protect it from "hostile actions" that could diminish the group's value, it said.
Although Ezra's principal assets are located in Singapore, it listed a New York address as its main place of business in its court petition filed last Saturday, together with two subsidiaries, Emas IT Solutions and Ezra Marine Services.
The bankruptcy filings will affect banks with exposure to the companies' debt.
A list of creditors seen by The Straits Times showed DBS Bank had unsecured claims of US$281 million (S$394 million) and secured claims of US$47 million on Ezra's holding company and its two units.
I think Ezra does not have the intention to cheat bond holders, but it was its overly ambitious expansion which caused the failure.
BOND HOLDER C. T. ONG
With massive impairments in asset values, unless creditors are going to accept debt-to-equity swaps as the flavour of the day, the companies that have refinancing risks in the next two to three years are going to struggle.
MR LEON YEE, managing director of law firm Duane Morris & Selvam.
OCBC Bank is owed unsecured claims of US$207 million and secured claims of US$73 million. United Overseas Bank had US$23 million in unsecured claims and US$10 million in secured claims.
A DBS spokesman said: "Our exposures to Ezra Holdings were moved to non-performing in the third quarter, and suitable provisions have been made."
But it remains to be seen whether the banks have taken sufficient discounts on the recoverable values of some collateralised loans, analysts said. Even after multiple efforts to deleverage, including rights issues and the divestment of its subsea business to Japanese partners, Ezra's consolidated group liabilities remain painfully high.
The group reported a net current liability position of US$887 million as at Aug 31 last year, and trade claims against Ezra have only piled up since then.
After its failed subsea joint venture Emas Chiyoda Subsea (ECS) filed for bankruptcy at the end of last month, Ezra revealed it is the guarantor of a whopping US$900 million of ECS' loans and liabilities.
On top of that, Ezra is expected to take a full US$170 million write- down for its own investments and loans to ECS.
Ezra shares traded at an all-time low of 1.1 cents last Wednesday before trading was halted. The counter is likely to be suspended from today.
The market is also bracing itself for the impact on Ezra's two listed subsidiaries - Emas Offshore, which has had trading suspended since March 6, and yard-operating unit Triyards. Triyards has guaranteed part of a joint bank facility with Ezra, and could pay up to US$30 million if Ezra defaults - enough to hobble its business.
Ezra also has $150 million in unsecured bonds maturing next year, split among at least 373 different investors. The Singapore Exchange has taken the unprecedented step of requiring Ezra to call a bond holders' meeting, and is aiding the bonds trustee HSBC Institutional Trust Services in this process.
Bond holder C. T. Ong said: "I think Ezra does not have the intention to cheat bond holders, but it was its overly ambitious expansion which caused the failure."
The fall of Ezra has sent chills down the spine of other players in Singapore's highly leveraged oil and gas sector.
Mr Leon Yee, managing director of law firm Duane Morris & Selvam, said: "With massive impairments in asset values, unless creditors are going to accept debt-to-equity swaps as the flavour of the day, the companies that have refinancing risks in the next two to three years are going to struggle."