Swiber fiasco casts a pall on banks’ ability to float O&M firms

Defaults, urgent capital raising loom over companies.

Analysts are jittery over Singapore’s offshore and marine (O&M) sector following the developments of Swiber’s liquidation-turned-judicial-management fiasco, as banks’ ability to continually float companies if the downturn prolongs is now seriously questioned.

According to a report by UOB Kay Hian, without banks’ support, O&M companies are likely to run into cashflow concerns. This could lead to a spike in O&M firms defaulting, or in dire need to raise capital.

Moreover, UOB Kay Hian asserted that cashflow is not expected to see an upturn as long as service prices remain depressed, or companies take drastic cost-cutting measures to improve it.

Meanwhile, the report shared that Pacific Radiance recently that it was providing US$10.1m in respect of doubtful receivables owing to Swiber’s related entities.

UOB Kay Hian stated that while market has been overly focused on the credit health of various O&M companies, Pacific Radiance’s provision brings to light the issue of non-publicly disclosed cross-transactions amongst the Singapore O&M companies.

“The notion of a large number of unknown unknowns poses a serious threat to our investment thesis for companies within the sector,” UOB Kay Hian noted.