The liquidation of Singapore-listed oil-and-gas explorer Swiber has put its debt holders at risk. Bankers and investors think most borrowers will remain unaffected by the news — but they fear things could get tougher for energy companies.
Investors and local bankers said Swiber's bankruptcy in the city-state should have limited ripple effects on the regional dollar bond market.
The size of the company and the outstanding debt is also fairly manageable, bankers said. But the potential default of the company's four outstanding Singapore dollar bonds, and a Chinese renminbi-denominated note, underlines the level of distress within the oil industry. That could impact other borrowers.
"Singapore has a well-tested legal system and clear procedures, so the liquidation process should give senior debt holders a better picture of what to expect in an orderly manner," Sean Chang, Hong Kong-based head of Asian debt investment at Baring, told FinanceAsia. “Small oil companies in the region may find it more challenging to refinance their debt because the global oil market remains substantially oversupplied.”
A Singapore-based debt syndicate head said the international bond markets should be largely immune from the local incident as most large oil companies have a strong buffer to withstand the ongoing slump in oil prices.
“Oil majors in China and Malaysia have a strong backing from their governments, so I don't see any spillover effect,” he said. "In the end, the US dollar bond and local-currency markets are two different types of animals.”
Swiber said in a 27 July statement that it had filed for liquidation in the High Court of Singapore, just weeks after it failed to sell $200 million of preference shares to AMTC, a London-based private equity firm. The court has appointed Cameron Lindsay Duncan and Muk Siew Peng as joint provisional liquidators of the company.
The winding-up application will be heard in court on August 19, the statement said.
Before the court hearing, DBS said the bank expected to receive about half of its S$700 million of exposure to Swiber, according to a July 28 filing to the Singapore Stock Exchange.
According to Swiber's 2015 annual report, DBS is one of the company's 10 principal banks.
DBS's balance sheet remains strong and there is "minimal impact" on its capital adequacy ratio, the bank said.
The bankruptcy application led to the departures of several executives, including Swiber’s chief financial officer Leonard Tay and vice-chairman Francis Wong, the exchange filings show. The company's liquidation filing was a surprise to the investment community as it repaid S$130 million on June 6 and S$75 million of perpetual bonds earlier this month.
Two calls to Swiber's general line went unanswered.
Trading in Swiber shares was halted on Wednesday, when the shares were last traded at S$0.109 apiece, down almost 50% this year.
