Bondholders in quandary as oil prices drop

Banks and bondholders brace for bad times as the oil and gas industry continues to remain in a slump.

KUALA LUMPUR: As the drop in oil prices leaves more companies in the industry starving for cash, bondholders and lenders are beginning to feel the pain.

And bondholders are seeking action to ensure they do not lose out.

According to a Bloomberg report, a group of bondholders last week issued a notice of acceleration on SD125 million of bonds sold by Malaysian oil services company Perisai Petroleum Teknologi Bhd.

Also last week, dozens of bondholders gathered outside a trustee’s office in Singapore to deliver a demand for immediate payment on S$100 million of notes issued by shipping trust Rickmers Maritime.

Bloomberg said Perisai didn’t reply to two e-mails seeking comment on its plan to defer its bond repayment by four months, which was rejected by bondholders on Monday.

Perisai’s 6.875 per cent notes were at 55 cents.

“Yes, it’s our responsibility that we bought the bonds but the company can’t just brush us aside,” bondholder Cheng Fong Kiew was quoted as saying after rejecting the plan.

Singapore’s Business Times quoted Perisai as saying yesterday it intended to engage with noteholders on an alternative proposal based on the indicative financing package.

Perisai, together with its joint venture partner Emas Offshore Limited, had received an “indicative offer” of financing from a financial institution on Sept 30.

The Malaysian-listed offshore services firm had told the Singapore Exchange that part of the amount from the indicative offer would be earmarked for a mutually acceptable resolution with its bondholders based on the availability of some USD20 million to the Perisai Group, according to the BT report.

Reuters had reported last week that Malaysian lenders were bracing for a hit to profits this year as they expect loans to the local oil and gas services sector to turn sour.

Reuters quoted UOB KayHian analysts as saying several Malaysian offshore services firms had risky gearing levels.

Meanwhile, Bloomberg reported that Rickmers was not expected to revise its debt-equity swap proposal despite the bondholders’ action.

Bloomberg said three defaults in the past year and at least seven restructuring proposals had shaken Singapore’s reputation as an Asian finance hub.

The Monetary Authority of Singapore had said last month that it would boost investor safeguards by year-end. The Singapore Government plans to enhance legal provisions for debt restructuring.

Oil-related firms face SD1.4 billion of Singapore dollar bonds maturing through 2018, with SD325 million due by the year end, according to Bloomberg-compiled data.