Photographer: Darren Soh/Bloomberg

Default Fears Resurface Over Singapore's Looming Debt Wall

  • Firms must repay S$38 billion of local bonds by end of 2020
  • Ongoing distress could lead to ‘futher defaults’: Alvarez

Default fears are resurfacing in Singapore ahead of a wall of maturing corporate debt, as a U.S. bankruptcy filing by a firm from the city flags lingering pain despite economic recovery.

Pressure to pay down obligations has been unrelenting. Companies excluding banks must repay S$38 billion ($27 billion) of local bonds over the next four years. The maturities peak in 2020, when S$11.2 billion comes due, the most since 2012, according to data compiled by Bloomberg.

For some of Singapore’s small debt-laden firms, a rebound in manufacturing and exports hasn’t been enough to bolster bottom lines sufficiently. In the latest sign of strains, Ezra Holdings Ltd., which provides engineering services to the offshore oil and gas sector, filed for Chapter 11 protection March 18 in the U.S. The Singapore government, seeking to make it easier to restructure debt at home, voted earlier this month to enact several changes to its Companies Act that are expected to take effect by March 31.

“I see ongoing distress which could lead to further defaults in the local bond market, in particular in oil and gas and shipping,” said Thomas Dillenseger, Hong Kong-based managing director at restructuring firm Alvarez & Marsal.

Even before Ezra’s Chapter 11 filing, six firms had defaulted on S$1.2 billion of notes since November 2015.

Click here for a Gadfly on Singapore’s bankruptcy laws.

Singapore’s government late last year introduced measures to boost marine and offshore engineering companies’ access to working capital, including providing loans to eligible firms. “Up to now, local lenders have generally been supportive, although it remains to be seen how long this resolve will last,” said Emmanuel Chua, Singapore-based senior associate at Herbert Smith Freehills.

Robin Chiu, Ezra’s chief restructuring officer, said in court papers that the company’s recent financial difficulties resulted from the “significant weakness and volatility in the oil price environment,” which has persisted since 2014. He added that the “prolonged challenging operating environment” in the oil and gas industry made it difficult for Ezra to carry out fundraising.

Ezra bondholders, who have seen prices slump to 5 cents on the Singapore dollar from 30 cent at the start of the year, face uncertainty as they navigate a U.S. bankruptcy process.

“I expect the recovery prospect for Ezra’s bondholders could be pennies on the dollar under the U.S. bankruptcy process,” said Kurt Metzger, a Singapore-based director at GEM Advisory, a debt restructuring consulting firm.

Ezra referred to the announcement on the firm’s Chapter 11 filing when asked about recovery prospects for bondholders.

Noteholders "may seek to assert rights in the Chapter 11 case," the announcement said. The firm intends to convene meetings with the bondholders to update them on its current position and provide further information regarding the filing.

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