Market watchers: Judicial management better option

A Swiber logo at their office in Singapore July 10, 2013.
A Swiber logo at their office in Singapore July 10, 2013. PHOTO: REUTERS

Judicial management is the better way to go for Swiber Holdings as opposed to liquidation, said market watchers.

The move allows the debt-ridden firm to continue operating but under court supervision, while attempting to turn around the business. Its earlier option - to be liquidated - would likely have meant stakeholders ending up with very little at best.

Corporate lawyer Ng Yeow Khoon, a partner at Withers KhattarWong, told The Straits Times yesterday: "The objective (of judicial management) is to give viable companies which are in financial trouble a chance to rehabilitate themselves and be restored to profitability.

"In a best-case scenario - and we have seen some cases of this - a white knight takes an interest in the company and invests in the business."

Mr Ng added that such a process also offers the firm's shareholders, bondholders and creditors a "second chance", saying: "Liquidation is the worst option as shareholders and creditors are on the losing end."

Under liquidation, companies are wound up and assets sold.

Clyde & Co associate director Koh Junxiang noted that Swiber's application for judicial management, which was lodged on Friday, suggests the company and its major financial creditors consider there to be "at least some chance that Swiber will be able to recover from its present financial difficulties".

"It may be that Swiber has a pipeline of work that, if completed, will result in an improvement in the group's cash-flow position and its ability to pay off its creditors, or at least in part."

But he also flagged the possibility that a judicial-management plan could fail to achieve its objectives. "If so, Swiber will enter into liquidation."

Mr Koh noted that there have been a number of companies seeking judicial management in the past year, including Technics Oil & Gas, Punj Lloyd's Singapore units and Mercator Lines (Singapore). "Rehabilitation procedures such as judicial management do have a fair rate of success," he said.

"However, whether a company can successfully rehabilitate itself depends on a number of factors, some of which are within the company's or judicial manager's control, like cost-cutting or the restructuring of business.

"Other factors are not, such as whether the economy or the particular industry sector recovers, or whether the existing pipeline of work can be extended or will result in new incoming workflow."

A judicial-management order remains in force for 180 days and may be extended by the company.

A version of this article appeared in the print edition of The Straits Times on August 02, 2016, with the headline 'Market watchers: Judicial management better option'. Print Edition | Subscribe