Swiber Holdings

[CityFarmer]

Oil & Gas companies hit by contagion fears after Swiber announces winding up

http://www.theedgemarkets.com.sg/sg/arti...es-winding

[BlueKelah]

dun follow this company much as most of the time it is high volume but seems too much debt liao.

this should set off the deleveraging in the local bond market which has been pretty bubbly and also further much needed consolidation in the local OnG scene...

[d.o.g.]

From the Bloomberg article:

“The market was expecting the banks to put something together because the word on the street was that Swiber was too big to fail given the amount of debt involved,” said Terence Lin, assistant director of bonds and portfolio management at the Singapore-based fund researcher iFast Corp. “The banks probably decided not to throw good money after bad.”

As noted in my earlier post, the banks are virtually assured of a 100% recovery on their loans, so there is no reason to bother getting involved in a restructuring. Too bad for the note holders and shareholders.

An expensive lesson that leverage cuts both ways. I wonder if the minority shareholders of Ezion, Ezra, Swissco, Pacific Radiance and POSH are paying attention. To be sure, they are not in identical businesses, but they all operate along the same value chain in the offshore oil and gas industry:

Exploration => Construction => Production => Support

Swiber is just the first domino to fall. It will be interesting (as a spectator, not a participant) to see who the next casualty will be.

[marandaz]

but largest is DBS followed by UOB then BoA

Didn't even go JM means equity holders all can go CDP collect share cert already

Anyone care to explain to me the impact of swiber on DBS & UOB? I thought the victims would be the bond holders, how would the banks be affected?

Care to explain why banks will not be affected in your opinion?

 
I thought bro d.o.g. explained it in earlier post? 

Thanks for point... miss it totally..

[specuvestor]

I don't think banks are in the business of taking back their principal. There are in the business of making the principal work. If it is possible for the borrower to continue the business they would do it. And they are not unaware of 2nd or even 3rd degree collateral damage... the credit quality and anxiety of whole sector now will be heightened.

Banks pull the plug only when they know it cannot be saved, or there is a run. Ditto when ML first pull on Bear Sterns. I'm skeptical that say DBS won't have a loss for Swiber which we will know in 3Q results.

[cfa]

It is not legally bankrupt yet , the most banks will set provisions for the doubtful debts , it will be written off after judgement is out . But for the case of Swiber , is it as good as gone case , especially for shareholders .

[Layman A]

Musicwhiz,
Thanks for the prompt reply. How I wish I have read your blog regarding Swiber earlier.

Greengiraffe, thanks for your insightful analysis.

Having holding Swiber for so long , and losing money ...
There come a point where I have to make a serious decision on whether to hold on to Swiber futher..., or switch to some blue chip like SPH , OCBC etc that pay out regular dividend.

I have decided to take the opportunity to sell it at 0.665 today, with some losses.
I guess these highly speculative play is not too suitable for me.

Some points I've like to highlight regarding Swiber here :

1. Highly leverage and cash tight, just like Olam, but the difference is Swiber do not have a Temasek behind them.

2. The issue of $160 million 7.125% fixed rate note.
Such high borrowing cost will practically eat up all their profits.
The net profit margin of 1Q13 is 8.3%, and they are borrowing at 7.125%, how much is left for the profit margin.

3. Accounts receivable
This is the key point that prompt me to dump Swiber.
In the 1Q13 financial report, they deliberately hide it, but digging further, in the FY2012 report, I found out that the amount have balloned to US$524 millions !
This really have spooked me out .

Consider this, the total revenue 2012 is US$952 millions, net profit is US$62 millions,
but the outstanding amount of receivable amount to US$524 millions !
I think they really have to work harder to recover some of the amounts that the customer owed them.

The above is my opinion for those who wish to plunge their head into this counter.
Good luck.

Actually, the trouble in Swiber has surfaced since 2013.
The sky rocketed AR and the failure for the management to explain why is it so has prompted me to dump it for good .
And I am so glad that I have done so !

[GPD]

DBS's statement on its exposure to Swiber's winding up.

http://infopub.sgx.com/Apps?A=COW_CorpAn...60701e087c

SGD700million in loans, notes and off-balance sheet item. Expect to recover half.

[shadow_walker]

DBS is the top market leader in SGD Bond DCM and has sold many of these bonds to their private wealth clients.

Cheap leverage was provided to the clients to acquire these bonds, in addition to Ezra, Ezion of which DBS is the principal banker too.

[weijian]

DBS is the top market leader in SGD Bond DCM and has sold many of these bonds to their private wealth clients.

Cheap leverage was provided to the clients to acquire these bonds, in addition to Ezra, Ezion of which DBS is the principal banker too.

Swiber doesn't have the pay its clients, but those clients have to pay DBS back!