The financial woes of debt-laden Ezra Holdings deepened yesterday, with the group's troubled joint venture Emas Chiyoda Subsea filing for bankruptcy in the United States.
Over in Norway, a wholly owned subsidiary of Emas Chiyoda also filed for bankruptcy yesterday.
Emas Chiyoda said in a press release yesterday that it has filed a voluntary petition for reorganisation under Chapter 11 of the US Bankruptcy Code in the Southern District of Texas Bankruptcy Court.
The move - made on the same day that Ezra requested yet another trading halt on its shares - is to facilitate the company's financial and operational restructuring, it said.
According to court documents, Emas Chiyoda's 40 largest creditors include Singapore's DBS Bank and OCBC Bank, with unsecured claims of around US$84.6 million (S$118.7 million) and US$13.1 million, respectively.Emas Chiyoda also owes Keppel Shipyard US$2.8 million.
In tandem with the filing, Emas Chiyoda has also received a commitment of up to US$90 million in financing facility from Chiyoda Corporation, which owns 35 per cent of the joint venture, and another party known as Subsea 7.
Subject to the bankruptcy court's approval, the financing will be used to "support the company's continuing business operations, minimise disruption to its worldwide projects and make necessary operational changes", it said.
Emas Chiyoda said that this "difficult but important step" in restructuring will allow it to focus on strengthening its financial and operational systems, and enhance the company's efforts to weather the current challenges.
"As a major player in the subsea sector, Emas Chiyoda's operational and financial performance is dependent on the macro outlook and expansion plans of oil majors," it said.
While Emas Chiyoda has an order book of over US$1 billion, the commencement dates of many of these projects remain uncertain, affecting utilisation levels and negatively impacting its financial performance.
To address these challenges, it said it has begun to restructure its balance sheet.
Ezra faces the issue of operating as a going concern amid mounting debts. It has previously acknowledged about US$170 million in impairment for its interests in Emas Chiyoda.
The beleaguered offshore services firm posted a full-year net loss of US$887.7 million for the 12 months ended Aug 31 last year.
It has applied to the Singapore Exchange for a further extension of 60 days to release its financial results for its fiscal first quarter ended Nov 30 last year.
Industry observers such as Mr Jeremy Punnett of Stamford Maritime notes that even Chapter 11 of the US Bankruptcy Code, which protects the debtor from legal and enforcement action worldwide, may not be enough to save Ezra.
"But who knows, with Chapter 11, they will probably get one more chance because the banks have few options. The working capital needs are still enormous though," Mr Punnett told The Straits Times.
Once a stock market darling, Ezra shares last traded at a record low of 1.9 cents on Monday, down 0.1 cent or 5 per cent from the previous session's close.