Southeast Asia's biggest bank by assets has seen its shares tumble 18 percent this year, underperforming rival lenders, on worries that earnings could suffer due to its significant exposure to China through its Hong Kong unit and tough times for the oil and gas sector.
SINGAPORE: Singapore’s largest bank was supporting Swiber Holdings Ltd until just before the troubled oil services company said it was unable to pay its debts.
DBS Group Holdings Ltd provided a bridging loan to Singapore-based Swiber shortly before it filed for liquidation, the bank said in an e-mail late Tuesday.
At the time, Swiber was executing a restructuring plan that included bringing in a new investor to address its high debt levels by boosting equity, DBS said in reply to questions from Bloomberg News. The oil company was also refinancing some of its vessels to raise cash, the bank said.
At the end of June, Swiber “had an order book of more than S$1bil (US$747mil) and many of these major projects were with strong counterparties,” DBS said.
“Swiber’s projects financed by DBS were on track, and it had no overdue payments with the bank.”
The Singaporean lender, which is among Swiber’s major creditors, said it had expected to be repaid for the bridge financing after the equity injection from the investor, which failed to follow through with the funds. DBS didn’t name the investor or provide the terms of its bridge loan to Swiber.
Swiber, which provides construction services for international oil and gas projects, had said on July 11 that it failed to get a US$200 million equity injection from AMTC Ltd., a
London-based private equity firm. AMTC had agreed to subscribe to preference shares issued by a subsidiary of the oil-services firm, Swiber said in a statement.
“I met the people from Swiber even in Singapore and we hired accountants to give us a report,” Smith O’Connor, AMTC’s CEO in London, said by phone Aug. 2.
“For weeks we tried to access the information to give a report to our investors to encourage them to invest in Swiber. The report was very disappointing for us.”
Last week, Swiber filed a petition to liquidate its operations, after facing payment demands from creditors. The company subsequently dropped the liquidation in favor of a plan to operate under judicial management, which would allow it to continue business under court supervision while it attempts to turn itself around.
DBS said last week it has S$700mil of exposure to the firm and its units, and that it only expects to recover about half of the amount.
About S$300mil of those loans are secured by collateral including property and vessels, DBS said in its e-mail. The balance is “largely project-related working capital facilities” comprising trade facilities such as letters of credit, receivable financing and contingent exposure such as performance bonds, the bank said.
The bank’s total exposure to Swiber amounts to 0.2% of DBS’s total assets and 1.7% of its first-quarter shareholders’ equity, according to a July 29 report by Goldman Sachs Group Inc.
DBS said last week that it is tapping S$150mil of provisions following Swiber’s financial troubles. That means credit costs will rise to 31 basis points this year from 26 points previously forecast, said Goldman Sachs analyst Melissa Kuang. The additional costs would dent the bank’s 2016 earnings by 3%, Kuang said.
Swiber defaulted on a S$150mil Islamic bond after notifying the stock exchange that it was unable to pay the coupon on the security due on Aug. 2. The non-payment caused a cross-default on the company’s four other outstanding notes, according to data compiled by Bloomberg.
DBS was the lead manager or co-lead manager for three Singapore-dollar bonds totaling S$410mil issued by Swiber that mature between October this year and August 2018, according to data compiled by Bloomberg. - Bloomberg
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