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After Hyflux's fall, Singapore debt buyers are scrutinizing these firms

[HONG KONG] The collapse of Singapore's water treatment firm Hyflux has increased investor scrutiny over other debt-laden companies that have sold bonds in the local currency.

More defaults could occur as earnings may worsen in a sputtering economy and riskier borrowers that creditors lent to amid low interest rates now struggle, according to S&P Global Ratings. Growth in Singapore's export-reliant economy has been cooling in the past year and the nation's central bank said it will slow in 2019, reflecting a weakening in key trading partners.

Borrowers excluding banks and other financial firms face S$5.1 billion of Singapore dollar debt due the rest of this year, before that climbs to a record S$12 billion in 2020, according to Bloomberg-compiled data. While rates look set to stay low for now, smaller firms with high leverage could still struggle.

"We see pockets of stress in the Singapore dollar bond market," said Ezien Hoo, credit analyst at Oversea-Chinese Banking Corp. "Smaller companies with high debt loads in industries facing a downturn could face difficulty making repayment."

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Firms that have a lot of short-term debt and are in sectors that are vulnerable to business cycles such as commodities and property development could face difficulties, according to Bertrand Jabouley, analyst at S&P Global Ratings.

These are some smaller firms with bonds maturing before end next year that bear watching, according to analysts.

CWT PTE

Debt coming due: S$100 million bond due March 18, 2020

The logistics company, a subsidiary of Hong Kong-listed CWT International Ltd, paid its bond due on April 18 but its parent's problems have cast a shadow.

CWT International earlier this month defaulted on a loan and lenders have seized the company's assets, including its stake in CWT Pte. An auditors' report contained in CWT International's 2018 annual results said there could be "material uncertainties" within the firm that "may cast significant doubt on the Group's ability to continue as a going concern."

Since it was bought in 2017 by CWT International, a unit of Chinese conglomerate HNA Group Co, there's been less visibility on the issuer's financials. CWT Pte had S$276 million of cash and a net cash position of S$135 million as of financial year 2018, according to a company overview on its website.

CWT International's total debt was HK$9.7 billion (S$1.69 billion) and cash and equivalents stood at HK$1.7 billion as of Dec 31, according to Bloomberg-compiled data.

A spokesman for CWT Pte declined to comment.

VIBRANT GROUP LTD

Debt coming due: S$66 million bond due Oct. 3, 2020

The logistics and real estate group's net income for the three months ended Jan 31 stood at S$3.9 million, a turnaround from a S$664,000 loss for the same period in 2018.

But the group has suffered setbacks and in January, it said a special audit of Blackgold International, a Chinese coal-mining group it acquired in July 2017, has revealed lapses. A fact-finding investigation by EY Advisory showed 2.05 billion yuan (S$414.7 million) in overstated sales, the firm also said in January.

Cash and equivalents stood at S$59.9 million as of Jan 31, according to the company's filing. Its total debt came to S$332.8 million, Bloomberg-compiled data show. The group said in a March filing it's currently seeking permanent waivers for loan covenant breaches resulting from the "Blackgold event."

In response to questions, Vibrant's chief financial officer Francis Lee referred Bloomberg to the result of its extraordinary general meeting on April 18, where shareholders "passed a resolution approving the disposal of our property with gross sales proceeds of S$227.5 million."

OXLEY HOLDINGS LTD

Debt coming due: S$300 million bonds due Nov. 5, 2019; S$150 million notes due May 18, 2020; S$150 million debt due Jan 31, 2022

This Singapore developer has been cutting leverage but its debt load is still high. Oxley said in a filing last month that it accepted an "expression of interest" from a US-based fund to buy a unit that owns Chevron House at Raffles Place for S$1.025 billion. However, the expression of interest isn't legally binding and subject to due diligence.

Its efforts to sell assets have faced some difficulties. The firm terminated a letter of intent to sell its two hotels to Gracious Land for S$950 million in March, prompting a slump in its share price.

"We are confident to redeem the bonds come November 2019. Presently, the company has commenced its deleveraging exercise and we expect to demonstrate the positive results in near term," an external spokesman for Oxley said.

The firm had total debt of S$3.9 billion and cash and cash equivalents of S$248.5 million as of Dec 31, 2018, according to Bloomberg-compiled data.

NEPTUNE ORIENT LINES

Debt coming due: S$280 million bonds due Sept 9, 2020; S$300 million notes due June 22, 2021

Since Neptune Orient Lines was bought by French shipping firm CMA CGM SA in 2016, there has been less visibility on the firm. NOL had a net loss after tax of US$134 million for its financial year 2018, while its total debt stood at US$2.6 billion and total cash at US$134 million as of Dec 31, according to unaudited figures included in a presentation on its website.

CMA CGM's leverage is likely to climb as it raised its ownership in Ceva Logistics AG, according to an OCBC Credit Research in a report dated March 6.

The bank also sees "further downside risks" stemming from the rise in protectionism and trade tensions. Global container volume plunged 7.7 per cent in February, the steepest decline on record, as volumes were undermined by a slowing global economy, according to Bloomberg Intelligence.

A spokeswoman for APL, a unit of NOL, didn't immediately respond to emails and a call.

LIPPO MALLS INDONESIA RETAIL TRUST

Debt coming due: S$75 million notes due June 22, 2020; S$120 million 6.6 per cent perpetual bonds; S$140 million 7 per cent perpetual securities

Investor sentiment toward Lippo Malls Indonesia Retail Trust has improved thanks to its sponsor PT Lippo Karawaci's plans to raise US$1 billion to cut debt. But the trust's exposure to Lippo Karawaci remains a concern for investors, who are waiting for a US$730 million rights offer to be completed.

Lippo Karawaci's shareholders this month approved the right issue, which is underwritten by the billionaire Riady family in Southeast Asia. The rights issue is expected to be completed by the first half of 2019, according to a spokesperson for Lippo Malls.

Income derived from Lippo Karawaci master leases only accounted for 8.2 per cent of Lippo Malls' first quarter 2019 gross revenue and the rest of related party tenants made up 15.6 per cent, according to the spokesperson.

As of March 31, Lippo Malls' gearing ratio stood at 33.9 per cent, well below the mandated 45 percent and the trust "will continue to be pro-active in capital management so as to fulfill all refinancing requirements," the spokesperson said.

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