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Ezra could face $170m writedown on jv investment, continues restructuring review

Ezra could face $170m writedown on jv investment, continues restructuring review
Singapore-listed Ezra Holdings in clarifying on the impact of its investment in troubled joint venture firm EMAS Chiyoda Subsea Limited (ECA) says that it could have to writedown the full amount of $170m.

“The board wishes to clarify that the company is assessing the impact of the writedown and anticipated downgrade of investments in ECS and subsidiaries (the ECS Group) and loans extended to ECS Group by its joint venture partners, Chiyoda Corporation and Nippon Yusen Kabushiki Kaisha (NYK),” Ezra stated.

“The company’s investment in, shareholders loan to and the inter-company balances owed by the ECS Group amounts to $170m and the full amount may have to be written down after the company’s assessment,” Ezra added.

Japan’s Chiyoda and NYK had issued warnings on 31 January of one-time writedowns of JPY38bn ($335.8m) and JPY13bn, respectively, against their stakes in ECS, the joint venture with Ezra.

Chiyoda stated that ECS, which is engaged in subsea construction work, has been impacted by the “current harsh business environment” and it is now “conducting a detailed review of its operating strategy.”

The potential writedown for Ezra as a result of ECS could further rock the already weak financial position of the group, as it had recorded a net current liability position of $887.22m for the financial year ended 31 August 2016.

The financial problems of ECS included the non-payment of charter by ECS subsidiary EMAS-AMC for the vessel Lewek Inspector, owned by Forland Subsea. EMAS-AMC, charterer of another vessel Lewek Connector, also entered into a short term standstill agreement relating to the vessel’s repayment of the bareboat charter with Ocean Yield for the months of December 2016 and January 2017.

Meanwhile, media reports claimed that Bibby Offshore had filed for arbitration against ECS, saying it is owed $14.7m from $18.1m of contracts performed in Trinidad last year. Ezra, however, sought to distance itself from the Bibby Offshore legal spat by stating “Bibby Offshore’s claims are against ECS, which the company does not control.”

Ezra had made separate announcements last year revealing ongoing initiatives by the group to review options to restructure its businesses, operations and balance sheet.

“The company also has various obligations owed to financial lenders and trade creditors and that will fall due from time to time such as the interest payment on its SGD150m ($106m) 4.875% notes due 2018 which will fall due in April 2017,” Ezra said.

“The group is in regular discussions with a number of its substantial creditors and has had dialogues with its key stakeholders, including its financial lenders and trade creditors.”

Ezra pointed out that “there can be no assurance or reasonable certainty that any discussions or any restructuring options will materialise or be successfully concluded.”

Should the restructuring not be successful the company flagged a going concern issue. "In the event the Restructuring is not favourably completed in a timely manner, the Company and the Group will be faced with a going concern issue," Ezra said.