KrisEnergy Bonds Fall in Singapore Amid Debt Covenant Stress

  • Company flags potential risk of stress to debt covenants
  • SGX Oil & Gas sub-index has dropped 44 percent since March 31

KrisEnergy Ltd. bonds are showing strain as the Singapore-based oil and gas producer said the industry slump could put its debt covenants to the test, as distress in the local-currency debt market spreads.

The company’s S$130 million ($96.5 million) of June 2017 notes were at 79.95 cents on the dollar yielding 37 percent as of 11:24 a.m. local time, based on indicative bids compiled by iFast Corp., which operates a retail and wholesale bond portal. The 2017 notes traded at 89.55 cents on July 28, its data show.

KrisEnergy said on Aug. 14 it’s exploring equity issuance, refinancing and asset sales to strengthen its capital structure as debt covenants may come under stress after energy prices crashed in the past two years. Swiber Holdings Ltd., an offshore oil and gas services firm, was put under interim judicial management earlier this month. The SGX Oil & Gas sub-index of 23 stocks, which include Swiber and KrisEnergy, has dropped 44 percent since March 31.

An “outright default” on KrisEnergy’s bonds is unlikely and the firm’s credit profile looks “certainly better” than most other oil and gas players despite weakness, said Benson Tay, analyst at iFast’s fixed income division.

KrisEnergy also has a S$200 million bond due in August 2018, in addition to a $148.3 million secured revolving credit facility with DBS Group Holdings Ltd., according to an investor presentation released Monday.

The note indicates that under the covenants, the firm’s permissible fixed-charge coverage ratio will be two times from next year, from the current 1.5 times.

KrisEnergy’s problems "will have a knock-on effect on the weaker upstream players,” said Joel Ng, an analyst at KGI Fraser Securities in Singapore.

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