 Singapore¡¯s PIL warns of defaults as it seeks government help |
Source |
American Shipper |
Post Date |
06/03/2020 |
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Singapore-based container line Pacific International Lines on Tuesday warned of likely loan and bond defaults even as it seeks an investment bailout by the Singapore government¡¯s investment company, Temasek Holdings.
The carrier, which raised more than $550 million from the sale of box ships earlier this year, said it has agreed on a debt repayment holiday until the of this year with most of its main lers.
The carrier also confirmed it had entered into an exclusive six-month agreement with Heliconia Capital Management, which is wholly owned by Temasek Holdings, about a possible investment in the company by Heliconia. PIL said discussions about a possible investment injection are at the preliminary stage.
Details of the financial lifelines were given in a statement to the Singapore stock exchange. While PIL and its subsidiaries, including intra-Asia operator Advance Container Line, are privately owned by PIL utive chairman and managing director Siong Seng Teo and his family, its bonds are listed on the stock exchange.
The carrier said despite its ¡°best efforts¡± in making significant progress toward rationalizing services and reducing asset costs, the COVID-19 pandemic ¡°has caused the situation to worsen in the past month.¡±
PIL did not give any details of its total debt, although figures given in the announcement suggest the company owes financial institutions at least $600 million and possibly more than $1 billion.
The carrier is the worlds 10th-largest container line, with 111 ships totaling 350,390 TEU, of which 45 are tered-in, according to Alphaliner. PIL is southeast Asias largest box line.
Contacted by JOC.com Tuesday, Teo declined to comment beyond what was contained in the stock exchange announcement.
Commenting on Temaseks possible investment, Lars Jensen, partner and chief utive of Sea-Intelligence Maritime Consulting, told JOC.com, ¡°It seems to be yet another case of state aid helping out in the container shipping industry.¡±
Seeks debt ¡®re-profiling¡¯ plan
PIL said in the announcement it had started discussions with 15 of its financial lers to agree on a formal ¡°debt re-profiling plan.¡± The company had obtained approval in principle from lers representing 97.6 percent of its total debt for a deferral of debt and interest payments until December 31, 2020 and a formal standstill on enforcement actions until December 31 or until the debt plan was approved.
PIL is continuing discussions with two other lers representing the remaining 2.4 percent of its debt. The talks come as one of those lers issued a letter of demand to PIL on May 11 requesting the repayment of more than $12.6 million within 10 business days, PIL said in Tuesday¡¯s statement.
The carrier is also renegotiating its lease agreements with finance lessors, it added.
PIL said it was likely defaults would occur as a result of its debt standstill and moratorium on enforcement action agreements with lers. Those defaults include payments under its S$60 million (US$41.7 million) Singapore listed bonds that are due later this year. PIL said it would hold informal meetings with bondholders about its debt restructuring plans.
Financial and investment firm Evercore Asia (Singapore) is advising PIL on its strategic and capital raising natives.
PILs financial woes were confirmed in March when Hong Kong-listed box maker Singamas Container Holdings said it was in discussions over the payment of US$147.5 million owed by PIL for containers. PIL is Singamas controlling shareholder with a 41 percent stake. In April, PIL was forced to deny rumors on social media about its potential bankruptcy.
Aside from selling six 12,000 TEU container ships at the start of this year, PIL also exited the trans-Pacific trades in March to focus on the north-south trades, including services to South America and Africa. It also sold its South Pacific subsidiary, Pacific Direct Line, to generate cash and cut costs.
PIL, which has shunned joining one of the major alliances in favor of joint services with carriers such as Taiwans Wan Hai Lines, has been considered a takeover target by larger carriers, especially Cosco Shipping Holdings. Teo and senior Cosco utives have had a long relationship stretching back decades, while Teo is also an indepent non-utive director of Cosco Shipping Holdings and Cosco Shipping Energy Transportation.
Container lines have been badly hurt by the coronavirus pandemic, with Sea-Intels Jensen warning the top carriers could lose between $800 million and $23 billion
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