Singapore Oil Services Companies Suffering

Ezra Holdings and Rickmers Maritime, two companies in Singapore's depressed oil services industry, are asking bondholders to give up some of their rights as they look to stave off demands for immediate repayment. Ezra and Rickmers launched consent solicitations early last week that respectively ask investors to waive potential covenant breaches and events of default, while also approving restructuring plans. 

In an unusual request, Rickmers specifically asked noteholders to "revoke any instruction given by any noteholder to the notes trustee that the notes are immediately due and repayable". A group of holders of at least 25 percent of Rickmers' S$100 million ($74 million) 8.45 percent bonds due 2017 is pursuing action to accelerate the notes. The investors had requested on September 28 that bond trustee DB International serve the notice. 

However, after Rickmers launched the consent exercise, the group decided to bypass the trustee and pursue the case directly through law firm Rajah & Tann. 

Rickmers is one of three issuers facing demands for immediate repayment in the middle of restructuring negotiations. 

The bond trustee officially notified Perisai Petroleum Teknologi on October 17 that its S$125 million 6.785 percent bond, maturing on October 3 2016, had become immediately due and payable. Swissco Holdings, which did not pay a coupon on October 16 on S$100 million 5.7 percent notes due 2018, faced similar demands. 

Investors are surprised at the issuers' push for waivers that will erode their rights to protect their own interests, and are worried that these could set precedents for other issuers facing potential defaults. They are particularly upset with Rickmers, which they feel has shown little consideration for other ways to improve its financial situation. 

"It's unbelievable that these companies are asking investors to reduce their various means to recover their investments," said one investor. "If Rickmers is sincere, it should be transparent and sit down with all the stakeholders with an open book to discuss other ways, such as cost-cutting, reducing management fees, instead of jumping to what should be the last resort to make only bondholders take the haircut," said another Rickmers investor. 

The flurry of repayment demands prompted Ezra to ask investors of its S$150 million 4.875 percent bonds due 2018 to waive the occurrence of any event of default or potential event of default if the company or its principal subsidiaries began negotiations or took any step to consider deferring, scheduling or other adjustments on their debt. In other words, Ezra is hoping to avoid any threat of acceleration under condition 10(e) of the bond agreement, which covers a broad spectrum of conditions under which an event of default can occur. 

This includes the threat of stopping or suspending payment of debt or beginning talks that could lead to a deferral or rescheduling of part or all of the debt. "Ezra is in a peculiar position because of its stakes in Emas Offshore, whose joint-venture loan facilities with Perisai are being affected by Perisai's default," said a credit analyst. A cross-default was triggered on the loans after Perisai defaulted on principal and interest payments on October 3. 

"Since its bond only matures in 2018, it is taking the preemptive step in getting the waivers for any breach as a result of the Emas JV loans." 

Bondholders are also filing to accelerate Swissco bonds after the company defaulted on a coupon payment last week. Investors are unhappy over the trustees' delay in filing the acceleration notice, one of the points about which they had complained in a letter to the Monetary Authority of Singapore earlier this month. They had also complained that bond trustees were demanding pre-funding and/or indemnity before they would take any action against the issuers. 

DB International finally filed a formal acceleration notice on Perisai on October 17, without the pre-funding or indemnity that it had sought earlier. A MAS spokesperson said that the central bank could not comment on a letter from a group of bondholders complaining of a lack of proper process in recovering their investments through the trustee scheme. "MAS is, however, carefully looking into the broader issues raised in these letters and is engaging the relevant industry parties," the spokesperson said.