SINGAPORE - Malaysian shipbuilder Nam Cheong announced on Thursday (July 20) that it will "temporarily cease" all debt repayments, including a coupon payment due on Sunday on S$75 million of notes, while it attempts to work out a debt restucturing plan with its creditors.
The builder of offshore vessels, which has RM1.84 billion (S$586 million) of debt outstanding in bank loans and bonds as at March 31, is seeking a moratorium on principal repayments and asking creditors for a haircut and to convert their debt into equity.
The company has also appointed PricewaterhouseCoopers Advisory Services (PwC) as its financial advisor on restructuring options for the group, and Drew & Napier and Skrine as legal advisors.
Nam Cheong has also started talks with shipyards to cancel or defer vessels under construction and is looking to sell existing ships on its fleet to boost liquidity.
In the event of liquidation, about 74 vessels ordered mainly from Chinese shipyards may not be fulfilled, Nam Cheong said in filings with the Singapore Exchange. It may also lose deposits placed on these orders and may have to pay some US$770 million for the unpaid amount for these contracts.
"In the event the restructuring is not favourably completed in a timely manner, the company and the group will be faced with a going concern issue," Nam Cheong warned.
Nam Cheong has three tranches of outstanding bonds - S$90 million due on Aug 28, S$75 million due in July next year, and S$200 million due in August 2019.
Nam Cheong outlined its proposed debt restructuring which it presented to noteholders at a meeting held the day before.
Under this plan, it is seeking a moratorium from bank lenders in Singapore and Malaysia, saying it won't be able to pay debt principal in near future.
The company is also asking creditors to consider making an exit with cash payout with a voluntary haircut or convert their debt into equity.
"Liquidation will very likely result in very minimal recovery for the lenders and noteholders, if at all," it said.
Nam Cheong troubles come on top of some S$1.35 billion of defaults in Singapore's bond market since late 2015, according to data compiled by Bloomberg.
Three other Singapore-listed offshore and marine services groups have been sunk by the slump in oil prices and huge cutbacks in spending by oil companies.
Swiber Holdings is under judicial management, Rickmers Maritime has opted to liquidate and Ezra Holdings filed for bankruptcy protection in the US.