IE Singapore, Spring back S$380m lifeline to battered O&M sector

Singapore

THE Singapore government has backed about S$380 million of loans extended by banks to the beleaguered marine and offshore engineering industry (M&OE) under two schemes announced last November.

IE Singapore and Spring Singapore have approved loan applications totalling S$380 million under the two government agencies' Internationalisation Finance Scheme (IFS) and Bridging Loan (BL), respectively as of April 2017.

In all, over 70 applications have been approved for loans under IFS and BL from late November through to this April, IE Singapore added in a statement to The Business Times.

The agency, in drawing on feedback from participating financial institutions, pointed to a strong demand pipeline for loans tied to the two schemes, with more than 100 companies still indicating interest.

The loan applications were submitted under the enhanced IFS and re-introduced Spring BL announced by the Ministry of Trade and Industry (MTI) in late November 2016.

An M&OE group can borrow up to S$15 million to meet its working capital needs under Spring BL; a company can access up to S$70 million in credit facilities to fund projects under the enhanced IE Singapore IFS. In both cases, the agencies will co-share the default risks of loans approved with and to be extended by participating financial institutions.

MTI rolled out the two schemes with the intent of extending financial support for companies facing difficulties under a severe sectoral downturn.

Now entering its third year, the prolonged M&OE downturn triggered off by a collapse in oil prices has seen companies struggling to access equity or debt financing. Fresh funding into the sector has come under constraint as default risks have spiked with several cash-strapped entities having declared insolvency since the second half of 2016.

Singapore-listed companies that were granted loans under either of or both IFS and Spring BL have applauded the move by MTI, though some suggested tweaks to help trim financing costs involved or speed up the application process.

Group chief financial officer of Federal international (2000), Loh Chee Meng said that the listed group, which specialises in procurement for oil and gas (O&G) projects, had two loans approved under IE IFS and Spring BL.

With support from UOB Bank, Federal International started engaging IE Singapore last October to explore backing for a loan of US$50 million (S$70 million) that will go towards financing the Zawtika project awarded to the O&G procurement specialist.

Federal International obtained UOB's internal approval for the project loan in Dec and IE Singapore formally approved its loan application under IFS in February.

Mr Loh said that UOB "has been very supportive" towards the application. But IE Singapore's backing "has been helpful" to lubricate the processing of a project loan because "banks have found it difficult to approve loans to M&OE players due to the fallout in the O&G sector".

IFS loan applications that are submitted after contracts are awarded would not directly help Singapore-based contractors bolster their competitive standing in O&G tenders.

"But knowing we can count on backing from IE Singapore's IFS to get banks' support in financing projects lends extra comfort at bidding stage," he said.

Federal International has also tapped Spring BL, which is presently dispensed as a term facility to the group. Mr Loh suggested for Spring to consider extending the option of structuring a BL loan under a revolving facility; this can go towards trimming financial costs tied to the loan.

Vessel owner-operator and shipbuilder, ASL Marine had a S$10 million project loan approved under IE Singapore IFS last year before the new scheme entered into force.

The S$10 million loan, meant for backing a commercial shipbuilding project for an overseas client, was approved within weeks.

Approvals of IFS loans in other instances, have run up to months considering loan applicatons have to be approved first by participating financial institutions before they are submitted to IE Singapore. ASL Marine's managing director, Ang Kok Tian suggested that to cut red tape, IE Singapore may wish to consider introducing mechanisms to "concurrently engage the companies and the banks involved".

Two other MO&E groups told BT they have either put in or are considering to file project loan applications under IE IFS.

Responding to a recent trade media report, offshore support vessel (OSV)-focused Pacific Radiance confirmed to BT that a project loan application it has submitted under IE IFS late last year, "is still in progress".

The OSV owner-operator also confirmed it has secured a loan under Spring BL.

Executive chairman of Kim Heng Offshore & Marine Holdings, Thomas Tan told BT that the group was extended a S$5 million loan under Spring BL.

Mr Tan added that the group hopes that IE Singapore IFS can also be extended to support debt financing for the purpose of distressed asset acquisitions.

IE Singapore said the government continues to monitor the M&OE sector by tracking indicators such as order books and output levels.