Are more offshore companies set to fail after Swiber?

The decision by Swiber to file for a winding-up order as senior management quit stunned the market for its suddenness - in that it wasn’t accompanied by a drawn out period of attempted restructuring or seeking a scheme of arrangement through the courts - it simply went from trading one day to saying it was in provisional liquidation the next and top executives had abandoned ship.

However, it wasn’t also that unexpected in that there had been a slew of bad news around the company recently and things were clearly difficult. And in a wider context many in the offshore market having been talking for some time about the possibility of one bigger listed names in Singapore going under, of which Swiber was one.

It was not surprising to see other listed offshore companies in Singapore were seeking to distance themselves from Swiber on Thursday as their already badly battered stocks took yet another hammering. The spotlight immediately went onto Vallianz – not surprisingly really given its largest shareholder is Swiber owning 25.2% of the company. Vallianz has come out to say it is “business as usual” and indeed its stock price did rebound 4.76% to a grand 2.2 Singapore cents per share.

Others such as Ezion and Swissco saw their share prices continuing to fall on Friday despite their attempts to point out they were not in the same part of the offshore sector as Swiber.

Extremely low stock prices for offshore companies only exacerbate already extremely difficult trading conditions, and potentially create an inexorable spiral downwards in terms of financing and cash to keep companies afloat day-to-day.

Swiber for example went from a market cap of SGD1.5bn ($1.1bn) in 2007 to around SGD50m before it was suspended from trading on Wednesday. Another major listed Singapore offshore company – Ezra Holdings saw its shares fall 3.8% in Friday morning trading and is now priced at just 5 Singapore cents per share, back in December 2013 it was trading at SGD1.39 per share.

Of course financial woes in the offshore sector are not just limited to Singapore and we have seen a slew of restructurings among the listed Norwegian offshore players and indeed on Thursday REM Offshore and Solstad announced a merger, which came out REM Offshore’s attempt to restructure its bonds.

With the fall of Swiber the financial status of other offshore companies will come under even greater scrutiny. Given no-one is forecasting improvement in the market any time soon Swiber is unlikely to be the last fail, not only in Singapore but across the offshore sector as whole.