As oil slides, Singapore oilfield service firms struggle to refinance debt

January 26
7:13 AM 2015

Two Singapore oilfield service firms are finding it tough to refinance debt maturing later this year as the slump in crude prices has made investors and lenders hesitant, banking sources said.

Ezra Holdings Ltd (EZRA.SI) has a S$200 million ($149 million) bond due September SGEZRA0915=RRPS and Swiber Holdings Ltd (SWBR.SI) has a S$85 million bond due in June SGSWBR0615=RRPS.

Even though the bonds are just five to eight months away from maturity, they are trading as much as 2-2.5 points below par, indicating the concerns around refinancing.

Eugene Cheng, group chief financial officer at Ezra, told Reuters the company has started looking at refinancing. Ezra hopes to use a mix of internally generated cash flow, asset sales and funds raised through the financial markets to address maturity coming towards the end of the year, he said.

"Every single oilfield service company will probably say the same thing to investors - just sit tight through this current cycle," said Cheng, adding that his company has no exposure to exploration activities that are most vulnerable to oil companies' spending cuts.

But the market is wary. Two lenders have refused to increase their commitment after Ezra had asked to increase an existing five-year loan and extend its maturity, IFR, a Thomson Reuters publication reported, citing bankers.

Cheng declined to give the loan's details, adding it was not part of the refinancing plan and was for building a vessel.

Singapore's oilfield services sector saw its fixed assets more than triple in five years, according to Thomson Reuters data, but is being threatened by cost-cutting at oil companies that will likely reduce demand for oilfield services.

"In the current market, anything other than investment-grade bonds will have difficulty getting priced," said Clifford Lee, head of fixed income at DBS (DBSM.SI), which has been involved in a number of bond issuances from both companies.

"When it comes to companies directly linked to oil and gas, they are facing more stress. Many bond and share prices have been hit, rightfully or wrongly, as they are getting the brunt of investors' concerns in a market that is already currently not as functional."

The turmoil in markets may force these companies to resort to private placement, said a Singapore-based banker at a global investment bank who declined to be named because the bank was considering participating in such deals.

Swiber recently placed a S$45 million rights issue with a deep discount, but that hardly placated investors. Its bond yields continued to climb to new highs and its shares are down 8 percent so far this year, after sliding 57 percent in 2014.

"We continue to actively bid for new projects in our target markets and remain confident of the group's business prospects as well as our ability to meet existing debt obligations when these come due," Swiber said in an emailed statement.

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