Slippery Oil prices plunging create bad-loan pain for S'pore banks, Swiber to restructure

DBS, OCBC and UOB exposed to downturn in energy sector

The plunge in oil prices is catching up with Singapore’s three largest banks.

Last week, Swiber Holdings Ltd., a small Singapore company that provides construction services for international oil and gas projects, filed a petition to liquidate its operations, after facing payment demands from creditors at a time when its business was under pressure. DBS Group Holdings Ltd., one of Swiber’s largest lenders, said it only expects to recover about half of the S$700 million ($522 million) it loaned to the firm and its units. Swiber subsequently said it’s dropping the liquidation in favor of a restructure plan.

DBS and Singapore’s two other large banks, Oversea-Chinese Banking Corp. and United Overseas Bank Ltd., are exposed to the downturn in the energy sector as a result of their lending to local companies which provide construction, shipping and maintenance services to the oil and gas industry. Many of those companies are suffering as the plunge in crude prices since 2014 curtailed exploration and other activity by oil and gas producers.

The financial health of the energy-services companies is the “key concern” for UOB over the next one or two years, Chief Executive Officer Wee Ee Cheong said at a media briefing Thursday on the bank’s second-quarter results. The bank’s exposure to Swiber is “manageable,” Wee said, though he noted that the wider difficulties in the oil and gas services industry were a factor behind the 17 percent climb in UOB’s nonperforming assets for the second quarter.

Debt Restructuring

Swiber said it will drop its liquidation application in a statement on Friday. Instead, the company plans to operate under a judicial management, which would allow it to continue operating under court supervision while it attempts to turn its business around. Some of its lenders had sought judicial management to recover more of their loans, according to people familiar with the talks who asked not to be identified because the discussions were private.

“I presume it helps them buy time but it’s uncertain how viable these oil-services companies are if oil prices remain low for an extended period of time,” said Alan Richardson, a Hong Kong-based fund manager at Samsung Asset Management, which owns DBS shares. “The indirect victims of these bankruptcies are the banks who are lending money to them.”

Shares of DBS were little changed at S$15.40 as of 11:02 a.m. local time on Monday, paring this year’s loss to 7.7 percent. OCBC gained 0.8 percent and UOB rose 0.6 percent.

Oil has slipped about 19 percent from its recent peak in early June, ending a recovery that saw prices almost double from a 12-year low in February. Prices are falling again as U.S. producers increased drilling amid a glut of crude and fuel supplies that are at the highest seasonal level in at least two decades.

Moody’s Downgrade

The recent recovery in oil prices from their lows has provided only modest relief, OCBC Chief Executive Officer Samuel Tsien indicated Thursday in a media briefing on the bank’s second-quarter results, which included a 61 percent jump in nonperforming assets.

“We cannot say it’s going to be the bottom yet. We may have two more quarters to go,” Tsien said in response to a question on the rise in delinquent energy sector loans.

Oil and gas-related loans made up 5.3 percent of gross lending by Singapore banks as of December, a higher proportion than at banks in Korea, Thailand and the European Union, according to Moody’s Investors Service. The deteriorating quality of the Singapore banks’ loans to energy firms, as well as weaker regional economies, prompted Moody’s to downgrade its outlook for the three largest lenders on June 30.

UOB and OCBC’s exposures to offshore marine services companies amounted to 13 percent to 18 percent of their common equity Tier 1 capital and loan-loss reserves at the end of June, Moody’s said in a statement Monday.

DBS is due to report its second-quarter results on Aug. 8.

In a sign of how fast the bad-loan problems are worsening, OCBC said new nonperforming assets jumped 91 percent to S$924 million in the second quarter, mainly because of companies linked to the oil and gas support services sector. Newly soured assets at UOB more than doubled to S$802 million, from S$372 million a year ago.

“New nonperforming-loan generation was the highest seen in this NPL cycle so far,” Aakash Rawat, a bank analyst at UBS Group AG in Singapore, said in a report last week. “While this was cushioned somewhat by recoveries and upgrades this quarter, it is debatable whether this will continue to be the case in future.”

The SGX Oil & Gas Index, which tracks 25 locally listed firms, fell to a record low last week after news of Swiber’s problems surfaced on Thursday. Among the biggest decliners on the index was Ezra Holdings Ltd., which provides engineering and construction services to the offshore oil and gas sector. Ezra shares plunged 17 percent last week.

Another indicator of the woes among Singapore oil and gas service firms comes from the bond markets. A total of 10 Singapore-listed firms in the sector, including Swiber, have asked bondholders to loosen their covenants so far this year, versus eight in all of 2015, according to data compiled by Bloomberg. That includes efforts to extend the maturity of debt and loosen covenants requiring companies to maintain certain leverage levels.

Oil-related firms have S$1.4 billion of Singapore-dollar securities maturing through 2018, with S$325 million due by the end of this year, according to Bloomberg-compiled data on July 18.

Among the three large Singapore banks, only DBS has disclosed its exposure to Swiber. OCBC isn’t listed among the oil and gas services firm’s main bankers in its 2015 annual report. UOB’s Wee didn’t quantify the bank’s lending to Swiber at the Thursday media briefing. - Bloomberg

Swiber Holdings to restructure its business

Big exposure: People queue up to withdraw money from DBS automated teller machines at a mall in Singapore. DBS Group Holdings Ltd, South-East Asia’s biggest lender, said it has about S700mil (US523mil) in total exposure to Swiber. – Reuters

SINGAPORE: Swiber Holdings Ltd, the Singapore-based offshore oil and gas services group, said it was dropping liquidation plans and intends to restructure its business following talks with the company's major financial creditor.

Swiber plans to operate under so-called judicial management, according to a statement to the Singapore exchange last Friday. The arrangement would allow the company to continue operating under court supervision while attempting to turn around the business.

Some of its lenders had sought judicial management to recover more of their loans, according to people familiar with the talks who asked not to be identified because the discussions were private.

Swiber filed a petition last Wednesday to wind up and liquidate itself after facing US$25.9mil of demands from creditors.

The company had US$1.43bil in liabilities and US$1.99bil in assets at the end of March, according to its financial statements.

News of Swiber's liquidation plans dragged down the SGX Oil & Gas Index to a new low. Local companies that rely on contracts within the offshore oil and gas market are reeling from a collapse in oil prices.

Last year, a measure of the country's bad-loan ratio reached the highest level since 2009, according to the Monetary Authority of Singapore.

The Singapore bourse said last Thursday it will be undertaking a “thorough investigation” into developments at Swiber after the company made key disclosures only after queries from the regulator.

Swiber on July 11 said it failed to get a US$200mil equity injection from AMTC Ltd, which had agreed to subscribe to preference shares.

DBS Group Holdings Ltd, South-East Asia's biggest lender, said last Thursday it has about S$700mil (US$523mil) in total exposure to Swiber. The bank said it expects to recover half of that amount.

Swiber in June redeemed S$130mil of 5.125% notes and in July redeemed S$75mil of 7% securities.

It has four more Singapore dollar bonds worth a total of S$460mil outstanding, according to data compiled by Bloomberg. – Bloomberg

Slippery slope for oil

Prices unlikely to go up too high for the rest of the year

PETALING JAYA: The continued oil supply glut in the market could mean a sustained low oil price environment, especially in the short to medium term.

The oil supply glut does not seem to be abating, with oil majors preferring to pump and store oil at the moment instead of cutting production.

According to unconfirmed reports, India is mulling over the idea of setting up a strategic petroleum reserve to store oil, similar to the ones that have been established in the United States and China.

As it is now, the ample amount of oil that has been extracted from underground is making its way to even more storage above ground. For instance, very large crude carriers (VLCCs) are increasingly being used for the storage of excess oil, with the tankers lying idle offshore in places such as the coasts of the United Kingdom.

According to the Financial Times, the supertankers have become the temporary centre to store excess oil and the ships are found off the coast of Scotland, where sea conditions are rough.

The International Energy Agency (IEA) in its latest Oil Market Report said that non-Organisation of the Petroleum Exporting Countries (Opec) production remains on course to fall by 0.9 million barrels per day (mmbd) this year, before staging a modest recovery in 2017.

However, the IEA said production from Opec countries has seen steady growth in recent years, with notable increases contributed by Iraq in 2015 and Iran in 2016.

“Our chart shows that, in fact, the oil output from the region rose to a record high in June, with production above 31 mmbd for the third month running. As such, the Middle East market share of global oil supplies rose to 35%, the highest since the late 1970s,” the IEA said in its report.

According to analysts, these concerns may return to haunt oil prices and US$40 could be the new normal for the time being.

Oil prices have staged a strong recovery since their January 2016 lows, gaining some 56% to their seven-month high of US$52.31 last month. The commodity, however, has since lost almost half of its gains.

It had gained on expectations by oil companies and Opec producers that the worst was over after hitting its January 2016 lows. However, Bloomberg reported that oil declined again in its biggest monthly drop in a year, as US producers increased drilling for a fifth week.

The increase in drilling by US producers came amid a glut of crude and fuel supplies that are at the highest seasonal level in at least two decades.

Oil prices have lost some 20% from their June 2016 seven-month highs and were last traded at US$41.63 per barrel.

Analysts said that oil could keep trending lower in the immediate term and that if it breaks the US$40 level, could challenge the next key psychological price mark of US$35.

Interpacific Research’s head of research Pong Teng Siew told StarBiz that he was “quite sure” that oil would be lower as short bets have piled up due to fundamentals.

“Many traders have reversed their long positions and have taken up shorts instead which will drive the oil market lower. My thinking is that the oil market today has got a tendency of being lower than what anyone expects, especially if momentum carries it through,” Pong said.

“I think it will drop below US$40 per barrel, and there is a likelihood that it will keep surprising people at this point in time. It also does not seem that the worst is truly over, and my worry is that the number of US rigs, especially in shale oil, appear to be on the upswing and there is no telling how much more is to come,” he added.

Pong noted that the demand side has picked up since January 2016, but that the take-up pace has been slower than before with the growth in supply.

“Demand was (then) tethered to China’s oil purchases for its strategic petroleum reserves, but that is now at full (capacity) and has seen demand tapering off, resulting in lower oil prices,” he said.

The IEA said that while market balance was seen in mid-summer 2016, the existence of very high oil stocks is a threat to the recent stability of oil prices, noting that in the first quarter of this year, refinery runs growth was 60% higher than refined product demand growth.

“Despite the regular upward revisions to demand that we have seen in recent reports, there are signs that momentum is easing, and although stocks are close to topping out, they are at such elevated levels, especially for products for which demand growth is slackening, that they remain a major dampener on oil prices,” the IEA said.

Social Economic Research Centre’s executive director and independent economist Lee Heng Guie said that fundamentals today may cause oil prices to continue to remain weak.

Lee said at this point in time, there may be a slight challenge when the next budget is tabled or planned, but that there is comfort that the oil revenue to the Government’s coffers is now at a low level of about 19%.

“The goods and services tax (GST) will make up for the shortfall, but this also depends largely on the health of the local consumer. If household spending remains cautious, then there will be an impact to the GST collections,” he added. - By daniel Khoo The Star/Asian News Network

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Take precautions on public wifi, hackers are watching you, travellers !

http://www.thestar.com.my/news/nation/2016/08/01/take-precautions-on-public-wifi-cybersecurity-firm-hackers-can-gather-sensitive-data-via-unsecure-co/

KUALA LUMPUR: If you are surfing the Internet on a public Wi-Fi, always assume someone is watching you out there.

Better yet, do not connect to any public Wi-Fi at all, said LE Global Services (LGMS) executive director Fong Choong Fook, whose private cybersecurity firm employs hackers to test the network security of the country’s major banks.

“I would never use a public Wi-Fi,” he said.

“Even an IT person may not be able to tell if the access point he is connected to is safe or if the activities are being watched.

“There may be signs like your Internet is slowing down but hackers can make it so elegant that you won’t even notice,” he said in an interview.

Malaysia’s national cybersecurity agency CyberSecurity Malaysia (CSM) said hackers could position themselves between a person’s device and the Wi-Fi router and are able to record sensitive data that the surfer is keying into his device.

Hackers can also “create” their own Wi-Fi and trick people into thinking they are connected to a credible public access point like the one from a restaurant, airport or office – when in actual fact these devices are connected to the criminals’ hardware.

Thus, they would be able to remotely watch everything a person is sending out on the Wi-Fi like passwords, e-mails or credit card information.

As frightening as these attacks may sound, Fong said this had been going as early as the 1990s.

Demonstrating to The Star how a hacker could steal information, LGMS set up an “evil twin” Wi-Fi using a laptop and named it after a famous franchise restaurant just below its office in Puchong, Selangor.

Fong connected two devices to this Wi-Fi and proceeded to log into social media, e-mail and Government websites.

Within seconds of logging in, the hacker’s computer began recording the activities in both devices in the experiment – recording every e-mail address, username and password that was keyed in.

Though the demonstration was only meant for the devices in the controlled environment of the LGMS office, three other users got connected to the dummy Wi-Fi, thinking they were linked to the franchise restaurant’s Internet, during the experiment.

“Hackers can target one specific person or they can target everyone in a cafe to get their devices to send all their data through their dummy Wi-Fi

“When they have your information, they can steal your identity. They can pose as you on Facebook, or send out e-mails to your contacts under your account,” he said.

Fong advised users to avoid connecting to public Wi-Fi or to only limit their browsing to Internet searches if they must connect to one.

The firm also suggested users to subscribe to VPN (virtual private network) technologies to secure their traffic.

VPN encrypts data on devices, making it hard for hackers to spy on the user’s online activities. Most VPNs are available on a subscription basis, much like an anti-virus programme.

So far this year, CSM has recorded eight instances where private Wi-Fi networks were hacked and 1,462 cases of online intrusions have been reported, which is nearly double the number of incidents compared to the same period in 2015.

It advised users to keep their Internet browsers up to date and to disable the feature which automatically saves password in the cache –as it makes it easier for criminals to steal.

by Nicholas Cheng The Star/Asia News Network

82% of travellers would use public Wi-Fi

KUALA LUMPUR: You are on a holiday in a foreign country. Naturally, you want to upload pictures to your Facebook or send messages to your friends back home or trawl the Internet for places to visit.

Chances are there is no Internet data connection where you are and you would search for whatever free Wi-Fi there is at the airport, hotel or cafe to stay connected.

An estimated 82% of travellers would choose to connect with unsecured public Wi-Fi, a practice which could up risks of cyberattacks, said Kasper­sky Lab.

The cybersecurity company surveyed 11,850 people worldwide and found that people on holiday would be carefree when it comes to their personal data protection.

The study found that 42% of travellers said they were less likely to care about the credibility of the Wi-Fi when they were on holiday compared to on business travels.

A third (33%) admitted to visiting websites of sensitive nature using foreign Wi-Fi, while almost half of the respondents conducted online banking (48%), shopped online (46%) and made private calls (35%) when they were abroad.

In a separate study, it found that at least 22% of travellers who conducted transactions online had experienced money loss while 8% had had a credit card compromised while in a foreign country.

Most of the time, victims do not even know they are being watched.

CSM advised users to keep an eye on their devices’ firewall alerts. Any trigger may indicate that a third party may be trying to access their devices illegally.

A report by MasterCard estimates that 10.9 million Malaysians travelled for overseas holidays in 2014, with the numbers expecting to hit 15.2 million by 2020.

The Kaspersky study also found that people were more likely to throw caution to the wind while on holiday with respondents saying they were 18% more likely to let strangers handle their smartphones to take pictures, 28% more likely to leave their devices unsupervised, 18% more likely to contact strangers online and 6% more likely to engage in “sexting”.

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A-G should not lead both services, it's long overdue!

Otherwise, it will create a negative perception of judiciary's independence, says CJ

https://youtu.be/rKJy0vpNVlA

KUALA LUMPUR: The Attorney-General must stop leading the Judicial and Legal Service Commission to ensure that the judiciary can be seen as a truly independent body, says the Chief Justice.

The head of the judiciary, Tun Arifin Zakaria, said that it would be a conflict of interest for the A-G to lead both services as he was a member of the Executive, when judicial officers comes under the judiciary.

In a democracy, the three branches of Government – the Legislative, Executive and Judiciary – must remain independent of each other.

“If the A-G continues to lead both services, I worry it would create a negative perception of the judiciary’s independence, an opinion many parties share,” said Arifin in a speech at the Judicial Officers Conference here yesterday.

The Chief Justice’s call is in line with the universal concept of judicial independence, whereby the courts should not be subject to undue influence from other branches of the Government or persons with partisan interests.

In an immediate reaction, Attorney-General Tan Sri Mohd Apandi Ali confirmed that the A-G’s Chambers (AGC) had received the proposal and was still studying it from the point of view of the Constitution and from a historic perspective.

“We will come up with the AGC’s views and discuss it at our next Legal and Judicial Service Commission’s meeting before the end of the year,” he told The Star.

Currently, the Judicial and Legal Service Commission managed the careers – from appointing, promoting, transferring and disciplining – of its members, which includes judicial officers like Sessions Court judges and magistrates, and legal officers like deputy public prosecutors and senior federal counsels.

Later, during a press conference, Arifin said people who disagreed with a judgment might say the magistrates were toeing the line with the A-G’s Chambers as they were effectively the same body.

“Imagine if a senior officer from the AGC or even the A-G himself was prosecuting. Lagi menggeletar (they’ll be even more nervous) to handle the case,” he said.

Arifin said Public Service Circular 6/2010 which made the A-G the chief of the judicial service was a contradiction to an existing decision by the Federal Court and no longer relevant

He pointed out that when the Commission was formed, the two groups were placed together as there were only a few hundred staff members. However, there were now 636 employees in the legal service and 4,787 serving in the judicial service as of April this year.

“The time has come for the judicial service to be lead by an someone from within its ranks,” he said, adding that such a candidate would be better equipped to run the service.

Arifin suggested that the Chief Court Registrar lead the judicial service while the Attorney-General lead the legal service.

The separation would also stop judicial officers and legal officers from being transferred between departments, unless the move is approved in writing by their chiefs.

However, Arifin said transfers should still be allowed, with due process, to ensure staff get experience as both judges and prosecutors.

Chief Registrar Datin Latifah Mohd Tahar, who also attended the conference, told reporters the paper on the proposal had been submitted to the Commission and the matter could be decided on within the year.

In 2006, the then Chief Justice Tun Ahmad Fairuz Sheikh Abdul Halim said the Judiciary intended to propose to the Government to abolish the Judicial and Legal Service Commission.

He added that magistrates and Sessions Court judges should be absorbed into the judiciary, fearing that there would be interference by “unseen hands” if they remain as civil servants.

by Chelsea L.Y. Ng and Qishin Tariq The Star/Asia News Network

It’s about time, says thelegal fraternity of proposal

PETALING JAYA: The legal fraternity applauded the Chief Justice’s proposal for greater separation between judicial and legal services, calling it long overdue.

Former Court of Appeals Justice Mah Weng Kwai (pic) said the proposal finally presented a clear demarcation between the judicial and legal services.

“It has been a combined service for the longest time, since before I joined the service in 1973,” said Mah, who started his career as a magistrate before becoming a deputy public prosecutor and then senior federal counsel.

Responding to the Chief Justice’s suggestion that officers would still be allowed to be transferred between the services, Mah said it should be taken one step further with both services completely independent and non-transferable.

Former magistrate Akbardin Abdul Kader said, if implemented, the move would ensure former DPPs were not biased when they were elevated to the bench.

“Hence, they will remain as DPPs until they retire and so the same for judicial officers,” he said.

Malaysian Bar president Steven Thiru said the Chief Justice’s concerns were valid and deserved due consideration.

He said the fact the Attorney-General was a member of the commission could open the judiciary to questions in any decision in favour of the prosecution.

He noted that the proposal would appear to require a constitutional amendment that would place Sessions Court judges and magistrates under the sole jurisdiction of the judiciary, and no longer under the Commission.

“This strengthens the concept of separation of powers that vests judicial power in the judiciary and requires the exercise of those powers without any influence by the other arms of Government,” he said, adding that the removal of any conflict of interest would inspire more confidence in the decisions of Sessions Court judges and magistrates.

Former Malaysian Bar president Yeo Yang Poh said the Bar had called for the change for decades, adding that from time to time, a Chief Justice of the day would “warm up” to the idea.

In 2006, when Yeo was serving as president, Chief Justice Tun Ahmad Fairuz Sheikh Abdul Halim made a similar call for a separation of the judiciary from the commission.

Yeo added that it was the first time he had heard of a proposal being handed to the commission by the Chief Registrar.

He said having the judicial and legal services combined was not desirable for two reasons: in practical terms, not every one could be fearless; while in theory, even if all legal officers could overcome the pressure, there would still be the perception of impartiality.

“You can’t blame an observer that perceives something is not quite right. A judge could say they would remain impartial even if judging their father; but does it look right?” he asked.

A former officer from the Judicial And Legal Services, who declined to be named, said the risk of transfers were a common reality.

“We used to threaten judges up to the Sessions Court (level), if they misbehave, we will get them transferred as DPPs. A few of them were actually transferred,” he said.

He said though the “threats” were in jest, it shocked him that they were sometimes really carried out, adding that not all moves were sinister, as it was occasionally meant as a lesson for subordinate courts which had made errant judgments.

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'Paper cat' Australia will learn its lesson

Around the announcement of the arbitration tribunal over the South China Sea, Australia was one of the most delirious countries. Canberra immediately supported the arbitration result and claimed China "must" abide by it, and also signed a joint declaration with the US and Japan. Australia has inked a free trade agreement with China, its biggest trading partner, which makes its move of disturbing the South China Sea waters surprising to many.


Australia is a unique country with an inglorious history. It was at first an offshore prison of the UK and then became its colony, a source of raw materials, overseas market and land of investment. This country was established through uncivilized means, in a process filled with the tears of the aboriginals.

Even with a scarce population and vast land, Australia has disputes with other countries over territory. It claims nearly 5.9 million square meters of land in the Antarctic, accounting for 42 percent of the continent. In order to back its territorial claims, Australia even brought up the activities of the British in the Antarctic as evidence.

Since The Antarctic Treaty was signed, all territorial claims over the continent were suspended. Canberra then raised another claims to demand the Antarctic continental shelf. It cited Article 298 of the UN Convention on the Law of the Sea to avoid a demand by arbitration by others.

Both historical rights and the exemption of arbitration as ruled in Article 298 of the UN Convention on the Law of the Sea were denied by the arbitration tribunal. Australia showed blunt double standards as if no one had a memory of what it did and said over the Antarctic.

Australia calls itself a principled country, while its utilitarianism has been sizzling. It lauds Sino-Australian relations when China's economic support is needed, but when it needs to please Washington, it demonstrates willingness of doing anything in a show of allegiance.

Analysts say that besides trying to please the US, it also intends to suppress China so as to gain a bargaining chip for economic interests. China must take revenge and let it know it's wrong. Australia's power means nothing compared to the security of China. If Australia steps into the South China Sea waters, it will be an ideal target for China to warn and strike.

Australia is not even a "paper tiger," it's only a "paper cat" at best. At a time when its former caretaker country the UK is dedicated to developing relations with China, and almost the whole of Europe takes a neutral position, Australia has unexpectedly made itself a pioneer of hurting China's interest with a fiercer attitude than countries directly involved in the South China Sea dispute. But this paper cat won't last. - Global Times

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Swiber to wind up, biggest Singapore casulty of oil slump; banks hit with crushing debts

Swiber Holdings

SINGAPORE - Singapore oil field services firm Swiber Holdings Ltd filed an application to wind up the company and said a Singapore court had appointed provisional liquidators, making it the biggest local name to fall victim to the slump in oil prices.

In a statement to the Singapore Exchange, Swiber said the hearing to wind-up the company has been set for August 19. Swiber, which operates a fleet of 51 vessels, did give any specific reason for the move but said it was facing letters of demand for US$25.9 million (S$34.9 million) and had warned earlier this month of delays in raising US$200 million in preference shares.

Local oilfield services companies have been burdened by weak oil prices, which have strained their liquidity, with charter rates tumbling and clients either delaying or cancelling projects. "If highly leveraged offshore and marine companies are unable to raise capital from equity markets, then they will be left with very little other options other than to file for liquidation or for judicial management," said Joel Ng, an analyst at KGI Fraser Securities.

Over the next year-and-a-half, bonds totalling nearly S$1.2 billion from energy and offshore marine issuers in Singapore will mature, with S$615 million due over the next five months, according to IFR, a Thomson Reuters publication.

Another firm, Technics Oil & Gas Ltd, and its unit were placed under judicial management this month.

Investors had turned more positive on Swiber after it redeemed two bonds in June and July totalling S$205 million.

Swiber said this month a preference share sale agreement for US$200 million had been delayed and that it was seeking legal advice. But a flood of letters of demand, including statutory demands, had flowed in since Monday, claiming a total US$25.9 million, as of July 26, adding more pressure on the company.

Swiber said some of its executive directors, including its chief financial officer, had resigned.

From just 10 vessels in 2006, Swiber has expanded to own and operate a fleet comprising 38 offshore vessels and 13 construction vessels. It has more than 2,700 employees across Southeast Asia and other countries, according to its website.

Swiber's longest dated bond due 2018 started falling sharply in mid-March. The provisional liquidators of the company, which has a market value of S$50 million, have asked for trading in Swiber's shares to be suspended.

The High Court of Singapore appointed KordaMentha Pte Ltd's Cameron Lindsay Duncan and Muk Siew Peng as the joint and several provisional liquidators of the company.

Sources: Reuters

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Feeling the heat: OCBC’s total oil and gas exposure was US9.32bil, nearly half of which to the offshore oil services segment. – Reuters

Banks hit by poor demand for loans from oil and gas sector

SINGAPORE: Two of Singapore’s top banks flagged mounting concerns about loans to the oil and gas sector, on the same day that a prominent local oilfield services firm announced it was winding up, under the weight of crushing debt.

The dour outlook from Oversea-Chinese Banking Corp and United Overseas Bank, Singapore’s second- and third-largest lenders by assets, respectively, came as Swiber Holdings said it had filed for liquidation, making it the biggest local name to fall victim to the slump in oil prices.

OCBC and UOB, along with Singapore’s No.1 lender DBS Group Holdings, have long maintained prudent lending standards and adequate capital levels to become some of the safest banks in the world.

But oil’s 60% slump over the past two years is beginning to impact them, as the lenders’ main activity is centred on South-East Asia, a region for which oil and gas is a key industry. Banks are being hit by both poor demand for loans from the sector and by more loans turning sour.

“The loan demand is very weak,” OCBC CEO Samuel Tsien told a quarterly earnings briefing, adding that the oil and gas services sector continues to be under pressure.

“Our distressed indicators for this portfolio continue to deepen, but have not broadened,” Tsien said.

Over the next year-and-a-half, bonds totalling nearly S$1.2bil (US$881mil) from energy and offshore marine issuers in Singapore will mature, with S$615mil due just over the next five months, according to IFR, a Thomson Reuters publication.

OCBC’s total oil and gas exposure was S$12.6bil (US$9.32bil), nearly half of which to the offshore oil services segment.

UOB expected that over the next one to two years the key concern for the bank would be companies in the oil and gas sector, its CEO Wee Ee Cheong told a briefing,

OCBC posted a 15% drop in quarterly profit, hit by lower insurance income, though UOB surprised with a 5.1% jump in earnings on higher trading income.

However, net interest income was weak at both banks, which also saw bad-debt provisions climb.

OCBC said its customer loans contracted 2% from a year ago due to lower trade loans and reduced offshore borrowings of Chinese companies due to more favourable onshore borrowing rates in China.

Shares of UOB were down 1.6% in late afternoon trade, while OCBC fell 0.6 percent. Shares of DBS, which will report results on Aug 8, were down 2.6%. – Reuters

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