A Norwegian ship lessor has been caught in the debt web of Swiber Holdings, with three of its vessels in Singapore arrested by a syndicate of banks.
Court documents obtained by The Business Times show that the anchor handling tug supply vessels Swiber Else-Marie, Swiber Mary-Ann and Swiber Ann-Christine were arrested over an outstanding mortgage claim of over US$43.4 million (S$62.78 million).
The plaintiff in the arrest is United Overseas Bank (UOB), which is understood to be acting as security agent for the syndicate of banks that had extended financing to the vessel owner in relation to a sale and leaseback deal. All three vessels were arrested at ASL Shipyard on Dec 22.
Sources also confirmed that the owner of the three vessels is Bukit Timah Offshore AS, a vehicle set up by RS Platou Finans Shipping AS under the Norwegian KS system to facilitate the sale and leaseback transaction with a wholly-owned subsidiary of Swiber Holdings back in 2008.
The deal called on Bukit Timah Offshore to buy the vessels for the purpose of leasing them to Swiber under 10 years' bareboat charters.
M3 Marine managing director Mike Meade said that a typical sale and leaseback deal through the Norwegian KS system is backed by as much as 80 per cent bank borrowings, with the remaining 20 per cent raised through equity.
Capt Meade also noted that bareboat charter payments pledged under sale and leasebacks in 2008 would have been "well above the current market rate".
The court-appointed judicial managers for Swiber and Swiber Offshore Construction Pte Ltd (SOC) told BT that, as then-interim judicial managers back in September, they had requested Bukit Timah Offshore AS to take re-delivery of the three vessels arrested by UOB.
A spokeswoman said that this request was put forth to the vessel owner "because SOC was not in a position to continue with the charter of the vessels".
This suggests that since September, Bukit Timah Offshore may have lost the bareboat charter income from Swiber that is supposed to go towards servicing the bank financing on the three vessels.
Under such circumstances, seizing the vessels is just one of the first steps creditors can take to mitigate an outright default. In the event the owner throws in the towel, creditors may have to bear the onus of selling or chartering out the vessels in order to recover the outstanding debt.
The resale market for offshore supply vessels, however, has come under pressure from vast overcapacity in the sub-sector.
Vesselsvalue estimated that market values for Swiber Mary-Ann and Swiber Else-Marie have halved from about the time they entered the global operating fleet.
Swiber Mary-Ann was valued at US$8.54 million as at Dec 28, down from US$18.93 million back in late July 2010.
Swiber Else-Marie was valued at US$8.19 million as at Dec 28, down from US$18.99 million back in August 2010.
This raises the question of whether UOB would need to increase its provisions against exposure to the Swiber fallout.
To date, UOB has not put a figure to its Swiber exposure although a court filing from the latter's judicial management application showed that the bank had extended over S$35 million in facilities to the distressed O&M group.
The Supreme Court's Sheriff Arrest list showed that in all four Swiber vessels were under arrest as at Dec 29.
The fourth vessel, Swiber Valiant, was listed as a fully-owned vessel under the O&M group's JM application in July 2016.
The July JM filing also showed at least one other active sale and leaseback on Swiber's fleet, for Swiber Sandefjord.
Sentosa Offshore AS, the shipowning vehicle set up for the sale and leaseback of Swiber Sandefjord, filed for liquidation on Sept 21.
This article was first published on Dec 30, 2016.
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