(Repeats story published late Friday with no changes to text)
* Singapore private bank clients are major holders of corp
* Oil and gas service firms have aggressively tapped bond
* Swiber failure highlights risk of these investments
By Saeed Azhar and Aradhana Aravindan
SINGAPORE, July 29 Clients at Singapore’s
private banks are likely to feel much pain from credit woes in
the oil and gas sector after snapping up high-yield bonds in
recent years, bankers say – a risk highlighted by the failure
of oilfield services firm Swiber Holdings.
Oil and gas services firms have aggressively tapped the
local bond market, particularly in 2013 and 2014, but a
subsequent collapse in oil prices, tumbling charter rates and
delays to projects has sent the industry reeling.
In addition to Swiber’s announcement on Thursday that it had
filed for liquidation facing hundreds of millions in debt,
smaller firm, Technics Oil & Gas Ltd was placed under
judicial management this month.
A number of firms have also sought bondholder consent to
relax covenants such as those relating to waivers for potential
non-compliance, banking sources said, adding that investors have
had a hard time reducing their exposure.
“It has been sort of a double whammy for private wealth
investors,” Todd Schubert, managing director, fixed income
research at Bank of Singapore, OCBC’s private banking arm.
“In the first place, the financial position of some of the
companies deteriorated and secondly if they wanted to reduce
their positions or get out, there isn’t the liquidity there in
the market to give them bids in a lot of these names.”
Energy and offshore marine companies in Singapore have bonds
totalling nearly S$1.2 billion ($880 million) due to mature over
the next year and a half, according to IFR, a Thomson Reuters
Some of the firms seeking to relax covenants have been
clearly struggling to service their debt, said a local debt
capital markets’ banker, declining to be identified as he was
not authorised to speak to the media.
“These guys had cash but not enough cash generation, their
ICR (interest rate cover) was under stress,” he said.
Private banks accounted for almost half of investments into
Singapore dollar corporate debt in 2014, a central bank report
said last year. During 2014, energy-related bond issuance
accounted for 17 percent of total issuance, according research
from Bank of Singapore, although it has declined sharply since
Debt at individual firms can be quite sizeable. Swiber alone
has five bonds with a combined value of S$551 million ($408
million) including debt of 450 million yuan ($68 million) and
S$150 million in Islamic bonds, that mature in 2016, 2017 and
Singapore’s biggest lender, DBS Group Holdings on
Thursday disclosed it had S$700 million exposure to Swiber while
the city-state’s two other top banks have flagged concerns about
loans to the sector.
($1 = 1.3506 Singapore dollars)
($1 = 6.6543 Chinese yuan)
(Reporting by Saeed Azhar and Aradhana Aravindan; Additional
reporting by Umesh Desai; Editing by Edwina Gibbs)
The article RPT-Private bank clients may lose big amid Singapore's oil and gas credit woes was originally published at Reuters - US Energy.