Singapore’s looming debt wall fuels concern as Ezra stumbles

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SINGAPORE: Default fears are resurfacing in Singapore ahead of a wall of maturing corporate debt, as a US bankruptcy filing of a firm from the city flags lingering pain despite economic recovery.

Pressure to pay down obligations has been unrelenting. Companies excluding banks in Singapore must repay S$38bil (RM120bil) of local bonds through the end of 2020, after four years through 2016 in which about the same amount fell due, according to data compiled by Bloomberg. Six firms have defaulted on S$1.2bil worth of notes since November 2015.

For some of Singapore’s small debt-laden companies, a rebound in manufacturing and exports hasn’t been enough to bolster bottom lines sufficiently.

In the latest sign of strains, Ezra Holdings Ltd, which provides engineering services to the offshore oil and gas sector, filed for Chapter 11 protection March 18 in the US. The Singapore government, seeking to make it easier for firms to restructure debt at home, voted earlier this month to enact several changes to its Companies Act that are expected to take effect by March 31.

“I see ongoing distress which could lead to further defaults in the local bond market, in particular in oil and gas and shipping,” said Thomas Dillenseger, Hong Kong-based managing director at restructuring firm Alvarez & Marsal.

Singapore’s government late last year introduced measures to boost marine and offshore engineering companies’ access to working capital, including providing loans to eligible firms.

“Up to now, local lenders have generally been supportive, although it remains to be seen how long this resolve will last,” said Emmanuel Chua, Singapore-based senior associate at Herbert Smith Freehills.

Robin Chiu, Ezra’s chief restructuring officer, said in court papers that the company’s recent financial difficulties resulted from the “significant weakness and volatility in the oil price environment,” which has persisted since 2014.

He added that the “prolonged challenging operating environment” in the oil and gas industry made it difficult for Ezra to carry out fundraising.

Ezra bondholders, who have seen prices slump to 5 cents on the Singapore dollar from 30 cent at the start of the year, face uncertainty as they navigate a US bankruptcy process.

“I expect the recovery prospect for Ezra’s bondholders could be pennies on the dollar under the US bankruptcy process,” said Kurt Metzger, a Singapore-based director at GEM Advisory, a debt restructuring consulting firm. – Bloomberg