A dramatic bid on July 27 by offshore services firm Swiber Holdings to be liquidated - corporate hara-kiri - was a bolt from the blue for Singapore market watchers.
Certainly, many knew the offshore sector was struggling with crude oil prices at historically depressed levels. But almost no one realised that behind the scenes, Swiber bosses had been frantically working with investors and banking executives for at least six months to get the firm out of a deepening financial black hole, court documents showed.
In the last days of May, a desperate Swiber chairman, Mr Raymond Kim Goh, was facing the abyss as US$466 million (S$627 million) in revenues from several projects had failed to materialise in the second quarter, and S$205 million in note redemptions - money borrowed from bond-holders - was due in June and last month.
To compound this nightmare, a US$200 million cash infusion that Singapore-listed Swiber had been banking on from London private equity firm AMTC to tide over its cash flow crunch had been delayed.
As the first S$130 million note redemption was due on June 6, and AMTC's funds still had not arrived, Swiber management approached its biggest lender, DBS Bank, which had arranged these bonds.
They spoke to DBS group head of small and medium-sized enterprises (SME) banking Joyce Tee seeking an urgent loan to help the firm redeem the bonds.
Since listing on the Singapore Exchange in 2006, Swiber had been raising funds through private share placements, rights issues and the issuance of convertible bonds. The offshore sector can be expensive. The Swiber group operates a fleet of 28 vessels in offering its suite of back-up services to the industry, so access to credit is vital. Owing to its relatively small market capitalisation, it has had to access debt markets using a S$1 billion multi-currency medium-term note and a US$500 million multi-currency Islamic trust certificate issuance programme.
Swiber began facing difficulties raising new funds from debt and capital markets as banks started cutting their exposure to the oil and gas industry from early last year as oil prices tanked. This and other factors resulted in a rapid deterioration in Swiber's finances in the second quarter, prompting its bosses to step up their push for a deal with investor AMTC.
TALKS WITH AMTC
On May 24, Swiber group vice-chairman Francis Wong, chief financial officer Leonard Tay and chief executive Darren Yeo met Ms Tee to inform DBS of the potential urgently needed investment from AMTC. They also told DBS the company had three notes totalling S$305 million due later this year.
Ms Tee told them that DBS would not be able to help with the repayment of the $130 million note due on June 6, or a $75 million note due on July 6, but was willing to consider granting a loan to help with another note.
Things briefly looked brighter when AMTC struck a memorandum of understanding (MOU) for a US$200 million investment into a Swiber subsidiary on May 27. The MOU provided that the first tranche of US$100 million would be made by May 31, and a second tranche 30 days later.
But fears that AMTC would not be able to make the May 31 deadline prompted Swiber to ask DBS for help with redeeming the $130 million note due soon afterwards.
This proved no solution. Ms Tee said DBS was unable to assist given the "tight deadlines". As the pressure grew, another meeting was held with DBS to discuss a bridging loan and this yielded some results. In anticipation of the AMTC funds, Swiber got a bridging loan of US$85 million from DBS on June 2.
On June 9, AMTC agreed to buy US$200 million of preference shares in a Swiber unit, Swiber Investment - a move that would have provided vital funds to help the company stay afloat.
But one day after the agreement was signed, Swiber Investment received a request from AMTC to do more due diligence - the process of checking a company's books that is a part of any corporate deal. This delay was the last thing Swiber bosses needed at this critical moment.
US$7.7m: Cash left in Swiber Holdings
US$4.6m: Cash left in Swiber Offshore Construction
US$736.2m: Outstanding loans with banks
US$25.9m: Letters of demand from trade suppliers and subcontractors
US$466m: Revenues from delayed and lost projects in second quarter
US$200m: AMTC's proposed investment
S$700m: DBS exposure to Swiber
This article was first published on August 7, 2016.
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