Nam Cheong to default on bond payments

Ailing Malaysian shipbuilder Nam Cheong has confirmed that it will default on the $2.25 million coupon and $90 million principal owed to the holders of its Series 002 bonds next Monday.

Nam Cheong will also fail to pay the $5 million coupon owed to holders of its $200 million Series 003 bonds, which is due on Saturday.

These bonds are secured by deposits equivalent to two coupon payments each for the Series 002 and Series 003 bonds, which are held in an escrow account by DBS Trustee.

Nam Cheong did not give a reason why the funds could not be released to bond holders, saying only that it "has been in communication" with DBS Trustee.

However, Series 004 bond holders have been slightly more fortunate. Nam Cheong said it paid the coupon owed to holders of the $75 million instrument on Aug 1.

The amount - $2.44 million originally due on July 23 - had been paid out of the deposit in the escrow account for the Series 004 bonds.

Separately, an informal steering committee comprising nine bond holders has been formed to facilitate meetings with Nam Cheong. Rajah & Tann will advise this committee.

Nam Cheong said it intends to organise discussion groups with bond holders from this week.

Trading of Nam Cheong shares was suspended last month, after the firm said it wanted to "temporarily cease" all debt repayments in a final bid to conserve cash and avoid liquidation. Nam Cheong said it continues to engage in discussions with its principal lenders, but things do not look sunny.

In June, OCBC filed a US$10 million (S$13.6 million) claim against Nam Cheong in a Malaysian court.

AmBank followed up with a RM70.4 million (S$22.4 million) claim earlier this month.

A version of this article appeared in the print edition of The Straits Times on August 24, 2017, with the headline 'Nam Cheong to default on bond payments'. Print Edition | Subscribe