Based on the financial statements of Nam Cheong for the quarter ended 31 March 2017, the amount of outstanding under bank loans and the notes by the group is approximately MYR1.84bn ($435.16m).
With the temporary cease on all repayments, the company will accordingly not be making payment of the next series of notes due on 23 July, under the company’s SGD600m ($438m) multicurrency medium term note programme.
“The company has appointed PricewaterhouseCoopers Advisory Services as its financial advisor to advise and assist the group, as appropriate, on suitable restructuring options for the group,” Singapore-listed Nam Cheong stated.
“The company has started discussions with the group’s bank lenders with a view to restructure the group’s bank facilities. The company will also continue to engage in discussions with all stakeholders, including the holders of the notes and trustee of the notes (…),” it said.
Nam Cheong pointed out that no definitive agreements in relation to the restructuring have been entered into by the company to-date, and if a restructuring is not favourably completed in a timely manner, the group will be faced with a going concern issue.
The proposed restructuring entails a scheme of arrangement that requires approval by 75% in value of all of the company’s creditors. Nam Cheong believes that the scheme of arrangement will offer significantly higher recovery for lenders and noteholders compared to a liquidation scenario.
Nam Cheong’s troubles unfolded as the offshore marine market suffers a protracted recession, due mainly to a severe oversupply of assets amid dwindling demand on the back of soft oil prices.
The Malaysian firm has been hit hard with build-to-stock OSV assets unable to secure buyers in a market flooded with too many vessels. In 2016, the shipyard delivered just two vessels and incurred an annual loss of $9.5m, compared to 11 vessels delivered in 2015 on profit of $6.2m, and 24 vessels delivered in 2014 on profit of $67.1m.
Last month, Nam Cheong received a writ of summons and statement of claims for a sum of around $10m from Overseas-Chinese Bank of Corporation (OCBC).