Ezra Holdings seeks waivers on bond covenants
Heavily leveraged Ezra is associate firm Perisai's single largest shareholder, with a 20.6 per cent stake through Emas Offshore and another unit.PHOTO: EZRA HOLDINGS
Oct 19, 2016
Proposals will be put to a vote on Nov 9; it is also assessing stake in troubled firm Perisai
Another offshore services firm is seeking leniency from bond holders to weather the oil price rout.
Ezra Holdings yesterday said it wants to loosen covenants on $150 million bonds maturing in 2018, and is in discussions with various parties on its financial obligations.
It said in a statement to the Singapore Exchange: "The sustained downturn in oil company expenditure continues to result in lower industry activity... Declining charter rates and excess capacity have affected the financial performance and fleet utilisation of subsea and offshore players."
Ezra's proposals to waive various financial covenants that could tip it into default will be put to a vote on Nov 9. It is offering note holders $250 for every $250,000 of principal they hold if they vote in favour of the proposals before 5pm on Nov 2, and $125 if they vote favourably after that date.
Though Ezra did not give any updates on its financial situation yesterday, it said it was assessing its investment in associate company Perisai Petroleum Teknologi and the accounting impact arising from the troubled oil and gas contractor's debt restructuring.
Perisai told Bursa Malaysia last week that it was insolvent, after failing to repay holders of $125 million of its notes which matured on Oct 3. Heavily leveraged Ezra is Perisai's single largest shareholder, with a 20.6 per cent stake through Emas Offshore and another unit.
$150m The principal value of Ezra Holdings' 4.875 per cent notes issued in 2013 and maturing in 2018.
$125m The principal value of Perisai Petroleum Teknologi's 6.875 per cent notes issued in 2013 and 2014 which it failed to repay on Oct 3.
Perisai has a hold over Ezra in the form of a put option, which it can exercise to sell its 51 per cent stake in two units to Emas for US$43 million (S$60 million), should it need the cash.
Ezra said it will share updates on its current position at an informal meeting for holders of its 4.875 per cent notes next Tuesday. Ezra held cash and cash equivalents of $43.6 million as of May 31, and must pay note holders a $3.66 million coupon next Monday.
OCBC Credit Research analyst Nick Wong said potential impairments resulting from the Perisai collapse could eat away at Ezra's covenant headroom. "Specifically, Ezra had a financial covenant that required it to have a minimum consolidated total equity of US$600 million. Ezra last reported total equity of US$797.8 million as of end-May. Though the environment remains challenging, the Perisai situation would have accelerated matters."
He added that Ezra could also be seeking to restructure loans held at the Emas Offshore level, or to resolve the cross defaults that affected the joint ventures which Emas Offshore had with Perisai as a result of Perisai's default. "We will need more clarity from management regarding this before bond holders will be willing to give up this covenant."
Ezra shares closed 0.2 cent or 3.57 per cent lower at 5.4 cents after the announcement yesterday.
The Straits Times understands Perisai has been served a letter of demand from its trustee on behalf of its note holders, although the firm has not disclosed this and could not be reached for verification yesterday.
Meanwhile, Singapore saw its fifth corporate bond default here in 12 months after rig and vessel charterer Swissco Holdings missed a $2.85 million coupon payment on Sunday. Holders of at least 25 per cent of the $100 million notes filed a notice demanding immediate payment with Swissco's trustee yesterday, according to documents seen by ST.