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Ezra flags ‘immediate going concern issue’ on $900m exposure as guarantor to EMAS Chiyoda Subsea

Ezra flags ‘immediate going concern issue’ on $900m exposure as guarantor to EMAS Chiyoda Subsea
Singapore-listed Ezra Holdings has revealed that it has an exposure of approximately $900m as a guarantor to its jointly-owned EMAS Chiyoda Subsea (ECS), which has filed for bankruptcy protection under Chapter 11.

ECS, together with its subsidiaries, have filed voluntary petitions for reorganisation in a US court on 28 February. Norway-based EMAS-AMC, which is burdened by unpaid charter fees, has also filed for bankruptcy in Norway.

While the US bankruptcy code Chapter 11 affords protection from creditors for ECS as it reorganises, Ezra said that the filing “unfortunately” does not deal with ECS’ charter hire liabilities, where a substantial amount of these liabilities of around $400m is guaranteed by Ezra.

“In addition, the ECS group currently has an aggregate of approximately $500m of loans owing to financial institutions. These are guaranteed by the company,” Ezra said, meaning that its total amount acting as guarantor to ECS came up to $900m.

“The company also has substantial contingent liabilities in relation to performance and/or bank guarantees granted by and/or procured by, the company for projects undertaken by the ECS group. Such amounts are not quantifiable as at the date [2 March 2017] of this announcement,” Ezra stated.

“In the event claims are made against the company in relation to any or all of these guarantees, the company will face an immediate going concern issue,” it added.

ECS is 40% owned by Ezra, 35% owned by Japan’s Chiyoda Corporation and 25% owned by Nippon Yusen Kaisha (NYK).

Forland Subsea, one of the vessel owners whom is owed charter fees by EMAS-AMC and guaranteed by Ezra, is “at liberty to apply for the company [Ezra] to be wound up by the High Court of Singapore” as the deadline for payment has expired.

Meanwhile, Ezra’s subsidiary EMAS Offshore Limited has been met with delays in the completion of its refinancing of financial obligations and provision of new working capital from a majority of its principal bankers.

EMAS Offshore, also listed in Singapore, stated that it is seeking an extension of time from its principal bankers.

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