Photographer: Darren Soh/Bloomberg

Watch the Bond Deadlines of These Four Singapore Companies

  • Bloomberg model flags risks based on cash flow, share price
  • Hogan Lovells Lee & Lee expects more defaults in local bonds

Singapore’s bond market has seen unprecedented defaults, and a slump in oil prices along with a weak property market are threatening to increase nonpayments this year.

The following is a list of four firms that have Singapore dollar-denominated bonds maturing by the end of next year, and that Bloomberg’s default-risk monitor suggests have the highest odds of failing to repay obligations in the next 12 months among the nation’s companies that aren’t restructuring their debt.

To be sure, all four companies are meeting their obligations and their default odds are all below 10 percent, according to the Bloomberg-compiled gauge, which is based on metrics such as share performance, liabilities and cash flow. They have default odds of 1.49 percent to 7.27 percent, the model shows. Under Bloomberg’s default risk scale, a score from 0.52 percent to 10 percent indicates a company’s debt would be high-yield, with distressed debt having a reading above 10 percent.

One company that’s already defaulted this year is offshore oil services firm Ezra Holdings Ltd., which filed for U.S. bankruptcy protection on March 18. The company’s probability of nonpayment in a year’s time shot up to 12 percent in March when its shares were suspended, from 2.5 percent on July 13.

Ezra’s troubles highlight how falling crude prices and a cutback in spending on exploration have battered offshore oil and gas services companies, helping push up defaults in the local market to S$1.35 billion ($978 million) since November 2015.

See also: Fullerton Fund Management warns of Singapore defaults

Singapore’s property sector is also looking vulnerable, with the nation’s home prices falling for a record 14th quarter in the first three months of the year, despite a recent uptick in sales. And the nation’s borrowers will face financial pressure in the next few years with S$36.4 billion of Singapore dollar bonds coming due by 2020.

“We do expect there will be further defaults,” said Andy Ferris, Singapore-based partner at Hogan Lovells Lee & Lee. “I think industries that will be under intense pressure are oil and gas services firms, shipping and commodities-related companies.” Ferris added that amid weakened property prices, “it’s possible we could see one or two defaults in the property sector.”

The list, based on data compiled by Bloomberg, excludes convertible bonds and perpetual securities and companies that have said they are restructuring their debt. It also leaves out companies that aren’t listed. Cash flow and debt figures below have been adjusted to ensure comparability across firms.

1. TA Corp.

  • Debt coming due: S$40 million of 5.5 percent bonds maturing March 29, 2018
  • Trailing 12-month adjusted operating cash flow: S$11.4 million
  • Adjusted total debt: S$369.6 million
  • Market capitalization: S$132.6 million as of June 6
  • Bloomberg Default Risk model one-year default probability: 7.27 percent, from 3.4 percent a year earlier

The Singapore-based real-estate developer posted a net loss of S$6.7 million in 2016, its second straight year of losses. Sales fell 30 percent to S$194.1 million, due to lower revenue in its construction, property development and investment divisions.

Neo Tiam Boon, chief executive officer of Singapore-listed property and construction company, said the firm has met semiannual interest payments for its bond since its issue date.

“We are committed and have the financial resources to meet all our interest and principal payments for our series 2 bond issue barring any unforeseen circumstances,” said Neo, referring to the securities due in 2018. TA has sufficient resources in place to meet all its debt obligations, he said.

He said that while the Singapore residential and construction markets have been in a “prolonged downturn due to the sluggish economy,” the firm is confident that it will eventually turn for the better. Neo said TA has recently closed an issue of warrants to existing shareholders to expand the company’s equity.

The bonds due 2018 were at 95.5 cents on the Singapore dollar on June 7, according to Bloomberg-compiled prices.

2. Pacific Radiance Ltd.

  • Debt coming due: S$100 million of 4.3 percent bonds maturing Aug. 29, 2018
  • Trailing 12-month adjusted operating cash flow: negative $14.9 million
  • Adjusted total debt: $557 million
  • Market capitalization: S$79.9 million as of June 6
  • Bloomberg Default Risk model one-year default probability: 4.16 percent, from 3.01 percent a year earlier 

The offshore vessels and support services firm posted a net loss of $14.7 million in the first quarter, widening from a net loss of $6.8 million for the same period in 2016. Sales fell by 24 percent to $14 million.

“Pacific Radiance will continue to work closely with lenders to ensure sustainability of its business at an appropriate debt level and are evaluating options on hand,” said Carol Chong, a representative at Oaktree Advisers, the external media company for Pacific Radiance. 

In a May 12 exchange filing, Pacific Radiance said that improving the group’s liquidity position remains a “key focus.” It added that a financial assistance plan announced by the government last year provides assurance that funding options are available to offshore marine companies affected by the downturn.

The notes due 2018 were at 20 cents on the Singapore dollar on June 7, according to DBS Group Holdings Ltd prices. Pacific Radiance’s stock fell 4.5 percent to an all-time low of S$0.107 on Wednesday at 2:15 p.m. Singapore time.

3. Falcon Energy Group Ltd.

  • Debt coming due: S$50 million of 5.5 percent bonds maturing Sept. 19, 2017
  • Trailing 12-month adjusted operating cash flow: $18.19 million
  • Adjusted total debt: $229.7 million
  • Market capitalization: S$55.7 million as of June 6
  • Bloomberg Default Risk model one-year default probability: 2.52 percent, from 0.42 percent a year earlier

The marine and oil and gas services provider posted a net loss of $10.2 million for the third quarter ended March 31, compared with a net income of $557,000 a year earlier. Sales slumped 74 percent due to declines in the oilfield and drilling services division and the marine division.

The firm has appointed KPMG Services Pte as an adviser to conduct an independent business review and will hold an informal meeting of noteholders on June 14.

An external spokesman for Falcon Energy declined to comment for the story. In a May 12 exchange filing, the company said that the business environment “continues to be challenging due to intensified competition and clients’ bargaining power.” Margins for vessel charter rates and fees for oilfield services are “razor-thin,” the company said. Its key focus will be on cash preservation, strict financial control and having a strong balance sheet, Falcon Energy said in the filing.

The bonds due 2017 were at 70 cents on the Singapore dollar on June 7, according to DBS prices. Falcon Energy’s stock fell by 1.5 percent to an all-time low of S$0.068 on Wednesday at 3:49 p.m. Singapore time.

4. Tee Land Ltd.

  • Debt coming due: S$30 million of 6.5 percent bonds maturing Oct. 27, 2017
  • Trailing 12-month adjusted operating cash flow: negative S$15.1 million
  • Adjusted total debt: S$214.9 million
  • Market capitalization: S$89.4 million as of June 6
  • Bloomberg Default Risk model one-year default probability: 1.49 percent, from 0.96 percent a year earlier

The residential and commercial property developer’s net income slumped 95 percent from a year earlier to S$66,000 for its third quarter ended Feb. 28.

“The bond maturity is something we are always mindful of and we believe we will be able to meet this obligation,” said David Ng, financial controller of Tee Land, in an email on May 8. “We have resources, internally and externally, in place to meet this debt obligation.”

In a March 27 exchange filing, Tee Land said that the Singapore government’s cooling measures continue to curb demand, and it expects the local property market to remain “generally unchanged.” The firm also has a presence in Thailand, Malaysia, Australia and New Zealand, according to its website.

The company’s notes due 2017 were at 99.5 cents on the Singapore dollar on June 7, according to Bloomberg-compiled prices.

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