Swiber’s Wind-Up Flags Rising Risks Singapore Bondholders Face

(Bloomberg) -- Singapore bondholders face further shake ups after Swiber Holdings Ltd. said it has applied to be wound up.

The move comes after Indonesian firm PT Trikomsel Oke and Pacific Andes Resources Development Ltd., based in Hong Kong, defaulted on three bonds totaling S$415 million ($307 million) since late 2015, the first cracks in Singapore dollar-denominated notes since 2009.

“As a Singapore company, the Swiber wind-up petition certainly is much higher profile, and raises the ante on the risks involved in buying corporate bonds in Singapore dollars,” said Todd Schubert, head of fixed income research at Bank of Singapore Ltd.

Singapore Exchange Ltd., which operates the local bourse, will undertake a thorough investigation into the developments at Swiber and will take any action if a breach of listing rules is found, it said in a statement Thursday.

Bank of Singapore’s Schubert said that it was unusual that Swiber was applying to be wound up so soon after paying off bondholders. Swiber had in June redeemed S$130 million 5.125 percent notes due 2016 and in July redeemed S$75 million 7 percent notes. It has four more Singapore dollar bonds worth a total of S$460 million that are outstanding, according to Bloomberg-compiled data.

Low recovery

“Swiber’s bondholders face low recovery prospects in a wind-up as they will likely rank behind other creditors such as employees, suppliers and lenders in addition to senior creditors,” said Schubert at Bank of Singapore.

Singapore-based restructuring consultant GEM Advisory said that bondholders should get “reasonable representation” in Singapore courts given that the amounts are significant but added that any liquidation of vessels in the current economic environment will bring the “lowest return” to the creditors.

For a Gadfly column on the issues faced by Singapore oil services companies please click here.

S&P Global Ratings said that relationship banks are taking a hard look at the viability of companies’ underlying business and seem more inclined to decide whether to extend funding on a commercial basis. “They won’t necessarily provide back-up funding or stave-off a bankruptcy just because they have skin in the game,” said Xavier Jean, an analyst at S&P in an e-mail.

To contact the reporters on this story: Denise Wee in Hong Kong at dwee10@bloomberg.net, David Yong in Singapore at dyong@bloomberg.net. To contact the editors responsible for this story: Andrew Monahan at amonahan@bloomberg.net, Ken McCallum

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