Ezra liquidation to hit DBS the hardest

The bank's exposure to the beleaguered group is around $637m.

As Ezra is foreseen to face liquidation, CIMB expects DBS to be hit the hardest, as the bank's exposure to the group is estimated to be $637m.

Ezra has called for a trading halt at the start of the month pending the release of an announcement. CIMB said this could be related to the results of its discussions with lenders and other stakeholders regarding its financial position, which could result in the group, its JV or subsidiaries’ liquidation in the worst case scenario.

"As of 31 Aug 2016, the group had US$989m of term loans and bills payable to banks, including US$568m from 75.46%-owned EMAS Offshore Limited and US$150m from 60.9%-owned Triyards Holdings Limited," CIMB explained.

The firm pointed out that DBS has the largest exposure to the Ezra group of companies at $637m, followed by OCBC at $300m and UOB at $166m. DBS's exposure is due to its lending to EMAS Chiyoda Subsea, given that it was the co-lead arranger for the loan facility for EMAS Chiyoda’s main vessel, the Lewek Constellation.

"Should the entire Ezra group go into liquidation, the banks will have to recognise their exposures as NPLs and make adequate provisions for the unrecoverable amounts," CIMB stated.

It furthered, "Based on 40-80% write-down in book value of fixed assets across the group, we estimate DBS will have to make specific provisions (SPs) of 8-16bp, OCBC: 9-12bp and UOB: 6-7bp. This assumes no SPs have been taken yet and will impact DBS’s FY17F net profit by 6-12%, OCBC: 5-8%, and UOB: 4-5%."