A stark outlook was expressed by auditor Ernst and Young that the OSV builder will face insolvency within the next 12 months in the event that the banks demand payments due from the commencement of the drawdown of a five-year club term loan facility from DBS Bank, United Overseas Bank (UOB) and Oversea-Chinese Banking Corp (OCBC). Due to the breach of one covenant as at 30 June 2017, the five-year loan technically becomes due and payable.
ASL Marine, however, clarified that the company has in fact received confirmation from its lenders that they are willing to waive, for one instance only, the breach of the covenant at the request of the group, subsequent to the financial year ended 30 June 2017.
“As the waiver was obtained subsequent to 30 June 2017, the group did not have an unconditional right to defer its settlement for at least 12 months after 30 June 2017,” ASL Marine stated.
The company explained that lenders have no intention to direct the facility agent to issue a default declaration or in respect of the breach, cancel or require an immediate repayment of the facility for the 12 months from 4 October 2017.
For its financial year ended 2017, the group’s total borrowings amounted to SGD549.5m ($405.8m), of which SGD235.75m was classified as current liabilities.
“The group’s loans and borrowings that are due for repayment in the next 12 months exceed its cash and bank balances as at 30 June 2017 of SGD36.14m,” ASL Marine said.
Last year, ASL Marine had successfully completed a restructuring involving a rights issue, a club deal, re-profiling, new facilities and deal with the bondholders.
“Whilst the restructuring has provided much needed headroom space, ASL Marine and the industry continue to face tough and very tough conditions,” the company said.
“This is evident by the fact that of the SGD71.7m loss (in FY2017), 50% of the loss of SGD53.9m arose from impairment losses, which in turn were largely due to falling value of vessels held as fixed assets and inventories.
“A further SGD18.4m or about 26% was due to provision on receivables. In other words 76% of the loss was essentially due to factors the company had little or no control over,” ASL Marine said.