Swiber to wind up, DBS takes big hit

SINGAPORE — Oilfield services firm Swiber Holdings shocked investors yesterday when it announced it had filed an application to wind up the company after facing letters of demand from creditors for about US$25.9 million (S$35 million).

Among the first big casualties is Singapore’s top bank, DBS, which said in a regulatory filing with the Singapore Exchange (SGX) that it will incur a net charge of S$150 million on its S$700 million exposure to Swiber, comprising loans, bonds and off-balance sheet items.

“As the exposure is partially secured, DBS expects to recover half of it and will provide fully for the anticipated shortfall ... DBS will tap on its surplus general allowances and the net allowance charge will be lower at about S$150 million,” it said.

The other two local banks appeared to be less severely hit. UOB deputy chairman and CEO Wee Ee Cheong said: “We do have some exposure … It doesn’t worry me. It’s something manageable.” Without referring to Swiber, OCBC CEO Samuel Tsien said: “As of this time, there’s no borrower in our customer base who have abandoned their operations.”

Swiber, once Forbes Asia’s Best under a Billion, also said yesterday its top management — including executive director and vice-chairman Francis Wong, executive director and group CFO Leonard Tay and executive director Nitish Gupta — had resigned to explore new opportunities. Shortly after the announcements, the SGX sent out a strongly worded statement, saying it is undertaking a “thorough investigation” into the developments at Swiber and will take regulatory action if its rules are breached.

SGX chief regulatory officer Tan Boon Gin said: “SGX would like to remind the market that shareholders have a right to be kept well-informed at all times, particularly when companies are facing business adversities. The company and relevant individuals should expect us to take action if any breach of the listing rules is found.”

Ms Margaret Yang, market analyst at CMC Markets Singapore, said: “This has brought a big shock to both equity and bond markets. It’s bad news (for shareholders). The company’s debt burden is quite high at US$1.43 billion, and the proceeds of liquidation will first be used to pay off its debts and liabilities before going to common shareholders.”

A combination of weak oil prices, tumbling charter rates and clients either delaying or cancelling projects have burdened the industry. Swiber’s shares have plunged by more than 90 per cent since oil prices started declining in mid-2014, taking its market capitalisation to about S$52 million. Swiber’s shares, which were at S$0.109 each before trading was halted Wednesday, were worth more than S$7.50 in late 2007.

Mr Cameron Duncan, who together with Ms Muk Siew Peng of KordaMentha have been appointed Swiber’s provisional liquidators, yesterday requested for a suspension of trading in Swiber’s shares. The winding-up application will be heard on Aug 19.

The slump of oil prices is only part of the story, noted Mr Nicholas Teo, trading strategist at KGI Fraser Securities. As far back as March 2015, red flags surrounding Swiber’s liquidity and viability had already popped up. Of contention then was a stretched balance sheet Swiber chose to withstand in order to satisfy the binge in orders when oil prices were soaring, said Mr Teo.

Last year, Swiber reported a net loss of US$27.4 million, against a profit of US$16.4 million in 2014. In the first quarter this year, it extended that loss by US$2.6 million. It recently said a US$710 million project in West Africa had been delayed, and a US$21 million project in the waters off Vietnam had been terminated. ADDITIONAL REPORTING BY LEE YEN NEE AND ANGELA TENG