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SWIBER SHOCK

DBS has S$700m exposure to Swiber

It says exposure comprises loans, bonds and off-balance sheet items

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DBS has a total exposure of about S$700 million to the Swiber group of companies, and expects only half of this to be recovered because the exposure is only partially secured.

Singapore

DBS has a total exposure of about S$700 million to the Swiber group of companies, and expects only half of this to be recovered because the exposure is only partially secured.

Singapore's largest bank said it will tap its general allowance to provide for the anticipated shortfall, bringing its net allowance charge to S$150 million.

It disclosed this on Thursday, following Swiber's stunning move earlier in the day to wind up the company, confirming market rumours about DBS's significant exposure to the beleaguered oil-services firm.

DBS's two peers in Singapore, OCBC and UOB, have reported no or "manageable" exposure.

DBS's total exposure comprises loans, bonds and off-balance sheet items, it said. The bank, which announces its second-quarter results on Aug 8, said there is "minimal impact" on its capital adequacy ratio.

Sources told The Business Times that, aside from DBS, the major creditor banks at Swiber are Bank of America-Merrill Lynch, Citibank and Deutsche Bank. Citi said its exposure is minimal and manageable. BoAML and Deutsche Bank declined comment.

Swiber said it is facing letters of demand for about US$25.9 million in all, and that it is seeking legal advice.

DBS has been very active in restructuring sales or chartering deals among its oil-and-gas clients, BT reported earlier.

Publicly listed as one of Swiber's 10 principal bankers, it is likely to have backed the company's redemption of S$75 million of 7 per cent, four-year bonds due on July 6, BT reported earlier.

It is also likely to have extended loans, backed against Swiber's fleet of construction vessels.

DBS's private-equity division is believed to have had extensive exposure to Swiber's multi-currency MTN (medium-term note) programme. In 2010, DBS was appointed Swiber's new arranger of the MTN programme, replacing an unnamed bank which had resigned from the position. No reason was provided then by Swiber.

In February, BT reported that DBS had secured potential buyers or charterers for certain Pacific Richfield Marine (PRM) Pte Ltd vessels. Taking the lead in marketing, DBS had reportedly bridged deals between PRM and Swiber and Ezra. DBS is a principal banker to Ezra as well, Ezra's annual report showed.

OCBC is not listed as a banker to Swiber, a check with Swiber's annual report indicated. OCBC's chief Samuel Tsien, without naming the company, said the bank has no borrower that has abandoned its operation.

"We do not foresee any customers who will abandon ship," he added at a press briefing called for the bank's second-quarter results.

UOB has "some exposure" to Swiber, but the bank said this would be manageable.

UOB chief executive Wee Ee Cheong said at a results briefing: "We do have exposure (to Swiber). It doesn't worry me. It's manageable."

UOB's chief financial officer Lee Wai Fai said the bank was already closely watching the developments at Swiber, which is "one of the accounts in the oil-and-gas sector that we have been monitoring". He added: "It's nothing new to us. We just have to manage (the situation)."

Shares of all three banks fell on Thursday amid broad market weakness, but DBS's share fell the most in percentage terms among them. The stock closed at S$15.88, down 38 Singapore cents or 2.3 per cent.