Auditor issues disclaimer of opinion on Pacific Radiance

The independent auditor of marine firm Pacific Radiance has issued a disclaimer of opinion on the group's financial statements for the year ended Dec 31 last year.

It said it was unable to obtain sufficient evidence to conclude whether the group's going concern assumption was appropriate.

Ernst & Young (EY) noted in the Pacific Radiance's annual report yesterday that financial statements have been prepared under a going concern assumption, as directors believe the group can complete its restructuring exercise.

"However, we are unable to obtain sufficient appropriate evidence to conclude whether the use of the going concern assumption... is appropriate, as the outcome of the restructuring exercise has yet to be concluded... and is inherently uncertain," EY said.

It also noted that if the going concern assumption is not appropriate, the carrying value of the assets and liabilities may differ from those in the balance sheet.

The group's current liabilities exceeded current assets by US$486.8 million (S$659 million) as at the end of last year, while total liabilities exceeded total assets by US$158.5 million.

It also posted a full-year net loss of US$101.2 million for the year to Dec 31, which included impairment charges of US$53.6 million, and generated a negative operating cash flow of US$8.58 million.

Separately, the company's current liabilities also exceeded its current assets by about US$145.2 million, with its total liabilities exceeding total assets by the same amount. It had assets as at Dec 31 with a carrying value of US$300.3 million that have been mortgaged to banks to secure loans, EY noted.

In 2017, the group breached certain loan terms and started talks with lenders and potential investors in relation to the restructuring of its borrowings and capital structure.

It had an informal arrangement with major lenders to temporarily suspend certain debt obligations.

Talks with bank lenders and potential investors are ongoing.

A vendor had also filed winding-up applications with the Singapore High Court against certain entities of the group in relation to demands for payment for services. The court granted moratoria, which have been extended to April 18.

Separately, the group has also received an alternative restructuring proposal but this is subject to regulatory and shareholder approval as well as successful debt restructuring, among other things.

Pacific Radiance is completing its due diligence and in discussion with bank lenders on the restructuring proposals, EY noted.

"These factors give rise to material uncertainties on the appropriateness of the use of the going concern assumption in the preparation of the accompanying financial statements of the group and the company," EY said.

Trading of the company's shares was voluntarily suspended on Feb 28 last year.

A version of this article appeared in the print edition of The Straits Times on April 12, 2019, with the headline 'Auditor issues disclaimer of opinion on Pacific Radiance'. Print Edition | Subscribe