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Court grants Swiber's JM bid, orders filing of cost schedule

Lawyers say clarity on costs will let creditors weigh cost benefits of rescue process against the potential returns

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Swiber could potentially raise US$294.9 million in working capital from disposal of fleet of vessels and property and insurance claims.

Singapore

HIT by mounting claims from creditors and trade suppliers and worsening cash crunch, Swiber Holdings' plea for a shot at rescuing its business under a court-supervised plan was answered on Thursday.

The Singapore High Court granted the firm's application to place both Swiber and its key operating unit Swiber Offshore Construction (SOC) under judicial management (JM) which signals the start of a process that could last up to 180 days - or less or more depending on the outcome.

This follows two months after the struggling oilfield services firm stunned the market when it moved to wind up its operations, blowing the cover on its dire straits only to switch tact and opt for the JM route days later after persuasion from its key banker DBS.

The ruling was delivered by Judicial Commissioner Kannan Ramesh who also ordered that a cost schedule be filed within a month from the JM order and be made available to creditors. Lawyers say clarity on the costs schedule is key as it will allow creditors to weigh the cost benefits of the rescue process against the potential returns.

JC Ramesh also ordered that the JMs (judicial managers) provide updates to creditors of the two companies every six weeks although the first update won't be necessary if a meeting is called within 60 days.

These two terms were earlier put forth to the court by Andrew Chan of Allen & Gledhill who was representing noteholders of Swiber's sukuk totalling S$200 million.

No creditors were physically present at the hearing on Thursday, although over 10 of them including DBS were represented by their respective lawyers, all of whom expressed "no objection" or took "no position" on a JM order.

JC Ramesh also suggested that given the number of creditors and the disparity in their categories that it could add value to form a creditors committee for the JMs to deal with them as a "composite group".

Lawyers familiar with the process say that generally, at the end of 60 days, the JMs will hold a meeting to present their proposal - a broad outline of a rehabilitation plan - to creditors. If creditors don't like the plan, the JM may put up an alternative plan, request more time or the rescue plan could be abandoned altogether - all this with the court's supervision.

In other words, 60 days from hereon could turn out to be crunch time to determine the fate of Swiber.

In his submission earlier as counsel for Swiber, Ashok Kumar of BlackOak LLC said that should the projections by IJMs (interim judicial managers) come to fruition, it is entirely likely that the returns would be better than in a liquidation scenario.

In a supplemental report dated Sept 27 filed by KPMG's head of advisory Bob Yap who was leading Swiber's IJMs - he and two others from KPMG are now the JMs - Mr Yap said that proposals have been received from 27 investors to provide equity/debt financing, asset financing and project financing. These, he said, suggest "reasonable prospects" of refinancing or recapitalising the group.

The report also stated that as at Sept 23, the group had seven projects worth US$1.7 billion and a potential order book of US$608 million based on projects it has bid for. In addition, Swiber could potentially raise US$294.9 million in working capital from disposal of fleet of vessels and property and insurance claims.

"On the strength of their projections and analyses, the IJMs should not be denied the opportunity to secure a better result for Swiber and SOC's creditors in a JM scenario," Mr Kumar submitted. He also pointed out that none of the creditors who filed their affidavits in relation to the case have objected to the JM although they placed on record their wish for certain creditor interests to be duly considered in the process. "If the IJMs are appointed as JMs, they will have due regard to the interests of all creditors," he added.

Swiber, in a Singapore Exchange filing on Thursday, said that it is unable to redeem, and pay the upcoming coupon payment, for its S$100 million notes due Oct 10, 2016. The notes paid a coupon of 5.55 per cent per annum.