KrisEnergy seeks six-month moratorium over $662m debt

KrisEnergy's wholly owned subsidiary, KrisEnergy (Asia), owes about U$179 million in outstanding principal to DBS under the RCF as at Aug 13.
KrisEnergy's wholly owned subsidiary, KrisEnergy (Asia), owes about U$179 million in outstanding principal to DBS under the RCF as at Aug 13.PHOTO: KRISENERGY

Oil and gas firm to restructure debt as it is unable to meet payment schedule; creditor Keppel supports application

Upstream oil and gas firm KrisEnergy has filed for a six-month debt moratorium to seek court protection from creditors while it restructures its debt totalling some US$476.8 million (S$662 million).

Keppel Corporation, which is a creditor and shareholder of KrisEnergy, said in a statement yesterday that it supports the application.

KrisEnergy said late on Wednesday night that it needs to restructure its debt because it was not feasible for the company to make payment of its financial obligations as they fall due.

Its existing debt agreements include a US$200 million revolving credit facility (RCF) with DBS Bank maturing on June 30 next year, $130 million 4 per cent senior unsecured notes due in 2022 and $200 million 4 per cent senior unsecured notes due in 2023.

There is also about $139.5 million in principal amount of senior secured zero-coupon notes due in 2024 and term loans from HSBC and Standard Chartered Singapore.

Keppel is a holder of the zero-coupon notes due in 2024.

Keppel also holds the key economic risk in the RCF, under a bilateral contract between Keppel and DBS. This means that Keppel may be required to make DBS whole for any loss the bank suffers under the RCF, among other things.

However, Keppel said the analysis by its appointed financial adviser Borrelli Walsh indicates that Keppel will not be required to make any payment to DBS

Keppel said that without a moratorium, there will be a significant risk that creditors' legal action may jeopardise KrisEnergy's ability to come up with a debt restructuring plan. However, as Keppel is a supporting creditor for the application, it still reserves the right to evaluate the restructuring plan, and to approve or reject it.

KrisEnergy's wholly owned subsidiary, KrisEnergy (Asia) (KE Asia), owes about US$179 million in outstanding principal to DBS under the RCF as at Aug 13. Keppel holds an indirect interest in this claim.

In its latest financial results released on July 18, Keppel attributed a value of around $131 million to its direct investments in KrisEnergy, comprising the zero-coupon notes, warrants and equity.

A DBS spokesman declined to comment yesterday. A banker close to the deal told The Business Times that DBS does not need to make provisions for the RCF as it is guaranteed by Keppel.

In the third quarter of 2017, DBS had made provisions for all of its oil and gas portfolio. During the bank's media briefing then, chief executive Piyush Gupta had said, referring to those provisions: "I can say with high confidence that we've cleaned the book. We're highly unlikely to take more in the book."

A HSBC spokesman likewise declined to comment.

KrisEnergy said it is aiming for a restructuring that will be equitable to all its stakeholders and will return it to viability in the shortest time possible.

It had applied to the High Court of Singapore to start a court-supervised process to reorganise its liabilities on Wednesday.

This will provide the company with "breathing space and room" that is essential to allow it to pursue restructuring with key stakeholders, added KrisEnergy.

The company also asked for a court order to restrain, among other things, the commencement of legal proceedings and enforcement actions by its creditors, for a period of six months.

The debt moratorium would automatically be in effect for 30 days upon the application.

In its financial results, also released on Wednesday night, KrisEnergy posted a net loss for the first half of this year amid lower oil prices and lower sales, resulting in a capital deficiency position for the group.

This brought the total debt on the balance sheet to US$476.8 million, while gearing stood at 110.8 per cent, as at June 30.

In recent months, KrisEnergy had already disclosed that it is over-geared and under-equitised, and had appointed advisers to review and implement options to improve its financial condition.

KrisEnergy added that it is considering potential asset sales to credible bidders in a competitive sale process, as well as a potential acquisition of the company as a whole. Each of these options will require the consent of DBS, the RCF lender.

Keppel said that without a moratorium, there will be a significant risk that creditors' legal action may jeopardise KrisEnergy's ability to come up with a debt restructuring plan. However, as Keppel is a supporting creditor for the application, it still reserves the right to evaluate the restructuring plan, and to approve or reject it.

If the restructuring process is not completed in a timely manner, KrisEnergy will face a going concern issue.

KrisEnergy had requested an immediate suspension in the trading of its shares.

Meanwhile, shares of Keppel closed at $5.90 yesterday, down 0.67 per cent. DBS closed down 1.16 per cent at $24.70.

A version of this article appeared in the print edition of The Straits Times on August 16, 2019, with the headline 'KrisEnergy seeks six-month moratorium over $662m debt'. Print Edition | Subscribe