Singapore-listed Nam Cheong is another Malaysian oil and gas casualty

 Singapore-listed Nam Cheong is another Malaysian oil and gas casualty
Nam Cheong says it will temporarily stop all debt payments.
PHOTO: The Star/ Asia News Network

PETALING JAYA - Nam Cheong Group Bhd is the latest company that is unable to service its debts due to the prolonged downturn in the oil and gas (O&G) industry.

The company, which is based in Sarawak and listed in Singapore, had outstanding debts of some RM1.84 billion (S$588 million) as of its latest reported first quarter ended March 31.

It said in a filing with the Singapore Stock Exchange that it would temporarily cease repayments on all its borrowings, pending a restructuring of its debts.

Thus, Nam Cheong said it would not be making a payment of the next coupon for its bonds due on July 23, 2017 with respect to the Series 004 Notes.

"We will be in communication with the trustee of the notes on this issue," Nam Cheong said.

The company said in its website that it is Malaysia's largest shipbuilder of offshore support vessels (OSVs).

It constructs OSVs that are equipped with the latest technology for use in the offshore O&G exploration and production and oil services industries.

Its clients include some locally listed and other international O&G firms such as Bumi Armada Bhd, Perdana Petroleum Bhd, Topaz, Borcos Shipping, Vroon, Petro Vietnam, Sapura Kencana Petroleum Bhd and Tidewater.

Nam Cheong said in an announcement in April that it planned to restructure its businesses, operations and balance sheet to preserve value for its stakeholders.

The company had said then that it wanted to be able to ride out the challenging market environment, including taking steps to address various obligations owed by itself that had fallen due and would fall due from time to time.

Nam Cheong has appointed PricewaterhouseCoopers Advisory Services Pte Ltd as its financial adviser to assist on suitable restructuring options.

"The company has started discussions with its lenders with a view to restructure its bank facilities," it said.

Nam Cheong said it would also continue to engage in discussions with its debtholders and stakeholders to come up with a restructuring plan that would achieve a fair and acceptable resolution for all and to position itself to ride out the challenging market environment.

It also noted that given there were no definitive agreements yet as of today, there could be no assurance or reasonable certainty that any discussions or restructuring plans would successfully conclude.

While it will work hard to achieve a resolution of this matter, the company cautioned that if the restructuring is not favourably completed in a timely manner, it would then be faced with a going concern issue.

It noted that market participants should exercise caution when trading in the company's shares henceforth.

Nam Cheong is certainly not alone in facing troubles plaguing the O&G industry in this period of low oil prices.

Other companies that are restructuring their debts include Singapore-based Swiber Holdings Ltd, Alam Maritim Resources Bhd, Perisai Petroleum Teknologi Bhd and Ezra Holdings Ltd.

Wire reports indicate that Swiber, an oilfield services company, is the biggest Singapore-based casualty of the prolonged slump in oil prices.

The company, which operates 13 state-of-the-art construction vessels with employees totalling some 2,700, had last year filed for liquidation.

In July last year, Swiber received letters of demand claiming a total of S$25.9 million.

Another big casualty of the oil slump is Singapore-listed Ezra. In April, oilfield services group Ezra, which holds a 22.5 per cent stake in Perisai Petroleum, voluntarily filed for bankruptcy in the United States under Chapter 11 of the US Bankruptcy Code.

With Ezra going bust, the emphasis is now on Perisai Petroleum as its associate holding company.

For a company that is in the midst of financial distress, it is imperative to have strong backing from its stakeholders.

Ezra's untimely bankruptcy could deliver a damning effect on Perisai Petroleum as the latter struggles to return to the black.

Should Ezra decide to sell its stake in Perisai Petroleum, it could further pressure the latter's share price, which is already depressed due to present market conditions.

Meanwhile, for Alam Maritim, the company had received approval from the Corporate Debt Restructuring Committee to come up with a debt restructuring scheme within 60 days from June.

Debt rating agency Malaysian Rating Corp Bhd had placed Alam Maritim's sukuk programme on its negative watch list due to "increased risk of missed payments".

Alam Maritim had issued a total of RM600 million in sukuk bonds in the third quarter of 2007, after it obtained the approval from the Securities Commission via a letter dated May 28, 2007.

The company had paid off a RM100 million tranche three years ago but of the RM500 million sukuk ijarah medium-term note programme, the current outstanding amount is RM75 million, of which RM30 million is due this month. It has to settle the balance RM45 million in January 2018.


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