International Business & Economy Bond issuers in trouble threatening retirees' and family monies

Bond issuers in trouble threatening retirees’ and family monies

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By: 永久浪客/Forever Vagabond

It was reported by ST yesterday that container ship operator Rickmers Maritime is in financial trouble. It is having difficulties in paying out interests and principals back to bondholders.

Two weeks ago, it told the bondholders that it would not be able to repay the US$179.7 million of debt due in March next year or the interest and principal on S$100 million of notes due in May next year. It wanted the S$100 million bondholders to exchange their debt with S$28 million of new perpetual fixed-rate, step-up convertible securities to avoid the company to go under.

It also said that it will not be able to pay $4.2 million in interests due November, unless the bondholders agreed to lose more of their principal.

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As of this morning, its share price has dropped to $0.04.

ST reported that many businessmen and retirees are upset as each has sunk S$250,000 or more into the bonds. They are demanding to get their principal back in full with interest immediately.

picture credit: ST
picture credit: ST

Retiree Jeremy Tan, 77, who has sunk in $2.25 million, said, “Many issuers such as AusGroup and Marco Polo Marine are restructuring but Rickmers has proposed the worst deal.”

Global shipping, oil and gas industry in trouble

One of the first companies in the troubled oil and gas industry to go into judicial management this year is Swiber. The depressed oil prices since 2014 have affected oil and gas exploration as well as the production sector and its related company services.

Many bondholders of Swiber were affected as Swiber defaulted in its payments. Bloomberg highlighted how Singapore’s not-really-rich have been burned by Swiber’s bonds. Elaine Tham who bought S$250,000 of Swiber’s bonds lost all her money which she had set aside for her children’s education.

Foreign companies in the oil and gas industry outside of Singapore, which issued bonds in S$, are also in trouble, affecting Singapore bondholders.

It was reported today that KL-listed offshore services firm Perisai Petroleum Teknologi is also struggling to redeem its bonds. It has S$125 million worth of notes due to mature next Monday. Earlier on 10 Sep, it started to seek consent from bondholders to waive the payment of principal and interest. It also wants to postpone the maturity date by four months to Feb 3 next year.

Perisai said it is operating under “extremely tight financial conditions” as it has been hurt by weak oil prices. It has twice delayed delivery of a drilling rig which it had contracted a Sembcorp Marine’s subsidiary to build. If Perisai goes under, Sembcorp Marine unit will be affected too.

Another Singapore entity affected is Singapore-listed Ezra Holdings. It has a 22.5 per cent stake in Perisai via two units and could find itself in jeopardy should Perisai fail to redeem its bonds. The two firms are linked through a US$43 million put option, exerciseable on Nov 26.

“Perisai is going to exercise the put option, but whether (Ezra’s) EOC is able to deliver – that’s another issue,” said an analyst.

The Singapore-listed Ezra is already one of the heavily leveraged firms in the offshore sector. Its third-quarter results showed its own total group borrowings and debt securities stood at S$1.2 billion as at May 31 but it only has just S$43.6 million of cash and cash equivalents.

When asked if Ezra would honour the put option, a company spokesman only said, “As and when there are material developments to the situation, we will provide a timely update through the Singapore Exchange.”

Ezra’s share price was $0.06 this morning. One of its board directors is former MP Ho Geok Choo.

The amount of money owed by Singapore listed companies to the public is staggering. As of Sept 15, S&P Global estimated that Singapore listed entities have some S$60 billion in bonds outstanding.

No doubt, many of these bonds are bought by the Singapore’s “not-really-rich”. As more companies, especially those in the shipping, oil and gas related industries go under, expect more retirees or Singapore families who have bought their bonds to have sleepless nights.

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