Singapore’s Rough Week for Shipping Foreshadows Challenging 2017

Hanjin Shipping Faces Chaos at U.S. Docks
  • Rickmers Maritime said Thursday it is asking for debt leniency
  • Firms face record $1.8 billion in bond maturities next year

It has been a rough week for Singapore’s shipping services industry and the going could get even tougher next year with record debt falling due.

Rickmers Maritime, which operates container ships, said Thursday it is asking creditors for leniency on about $253 million of debt. Marco Polo Marine Ltd., a provider of barges and tugs for coal, steel scrap and iron ores, said Tuesday it’s asking bondholders for approval to delay paying S$50 million ($36.5 million) of securities due next month. The city-state’s shipping and other logistics firms face a record $1.8 billion in note repayments in 2017, data compiled by Bloomberg show.

Singapore, a former British colony, relied on its port to help transform itself into one of Asia’s so-called tiger economies. Container throughput shrank 8.7 percent in 2015 as global trade slowed, while slumping crude prices have hurt firms that service the energy industry. Swiber Holdings Ltd., which operates construction vessels to support the oil industry, defaulted in August, while Ezra Holdings Ltd. said last week it held talks on potential fundraising. Sembcorp Marine Ltd. and Keppel Corp. have reported slumping profits.

“It doesn’t look like the worst is over for the maritime industry,” said Joel Ng, an analyst at KGI Fraser Securities in Singapore. “It’s tough for the creditors. The banks need to continue to provide liquidity given the industry’s cashflows are tight.”

Singapore’s bad loans rose to 2.25 percent of the total in 2015, the highest since 2009. Oil services firms are also facing mounting difficulties as crude prices have dropped to about half the prices in 2013, forcing energy giants to put investment plans on hold.

“The shipping and oil and gas space has really been a minefield in the bond market,” said Terence Lin, an assistant director of bonds and portfolio management at fund researcher iFast Corp. in Singapore. “One of the positives from this is that there’ll be increased scrutiny on very levered companies, and a push for management to take corrective plans or pre-empt liquidation outcomes.”

Rickmers Maritime won’t be able to repay $179.7 million of senior debt due in March 2017 and the interest and principal on S$100 million of notes due in May 2017, it said in a filing Thursday. It’s asking investors to exchange their debt with S$28 million of new perpetual securities to avoid potential liquidation or judicial management that it says would be "likely to result in zero recovery for noteholders."

Marco Polo Marine told some noteholders of its debt-delay plan at a meeting Tuesday, and those present “appeared generally supportive,” it said in an exchange filing. It will hold another meeting on Sept. 16 on the debt extension proposal, which it didn’t disclose.

“The boards and management teams of the offshore and marine bond issuers still seem to be in denial on the need to do proper balance sheet restructuring,” said Kurt Metzger, a Singapore-based restructuring consultant at GEM Advisory. “Bondholders are facing significantly higher risk and should be looking for significantly higher returns and improved structures."

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