A key bond holder has delivered a blunt message to debt-laden Ezion Holdings: Hand over all my money.
The bond holder, with a substantial share of the liftboat operator's tranche of $120 million bonds backed by DBS Bank, has asked Ezion to redeem his notes for their full principal sum, given that the company's shares have ceased to trade.
Ezion chose to suspend trading of its shares in the middle of last month as it moved to work out a refinancing plan with lenders. Talks are ongoing.
Ezion has sold seven tranches of bonds since 2013, racking up some $695 million in outstanding bonds payable. But the last $120 million tranche of Series 009 notes - sold in mid-2015 - is unique.
At the point of issuance, a clause was written into the pricing supplement for the tranche that gives bond holders an option to have their bonds redeemed early.
The clause states: "In the event that the shares of the issuer cease to be listed or traded on the SGX-ST, the issuer shall, at the option of the holder of any note, redeem such note at its principal amount together with interest accrued to (but excluding) the date fixed for redemption."
The substantial bond holder, who asked not to be named, served an exercise notice of redemption to Ezion and DBS Trustee last Friday to redeem his bonds.
In his letter, he attached a supporting legal opinion from Dentons Rodyk that argues that since Ezion's shares have ceased to trade following the suspension, the condition for redemption has been triggered.
"There is no ambiguity in the words," his lawyers concluded, referring to Rule 8.10.3 in the Singapore Exchange rule book, which states: "Securities or futures contracts which have been suspended from trading cease to be traded on the trading system. Except with SGX-ST's approval, a trading member must not execute any transactions in a suspended security or futures contract."
Ezion has yet to respond to his notice, the bond holder said yesterday. If Ezion accepts this interpretation, it must immediately repay all Series 009 bond holders who choose to have their bonds redeemed.
If Ezion is unable to cough up the cash, DBS must stand in for the company, as promised in the committed funding agreement.
DBS was the sole arranger for all of Ezion's bonds. It is also one of Ezion's principal bankers.
When Ezion sought refinancing in mid-2015, the price of crude oil had crashed below US$60 a barrel and lenders had turned wary of the oil and gas sector. By giving its backing to the Series 009 bonds, DBS was able to help Ezion secure a 3.65 per cent annual interest rate.
So far, Ezion has not defaulted on any of its bonds. It will present bond holders with a debt restructuring proposal next Monday.