CH Offshore unveils details on US$4.1 million loan to Falcon Energy Group

CH Offshore this year granted a US$4.1 million loan to Falcon Energy Group to help the offshore oil and gas contractor meet its payment obligations to its banks - largely because Falcon Energy had earlier pledged its shares in CH Offshore to a bank to secure a loan.

This was revealed by CH Offshore in a statement on Thursday, in response to queries by the Singapore Exchange.

The SGX asked for details on how the US$4.1 million receivable came about, as disclosed in the firm's annual report for the year ended Jun 30 this year, and in its first quarter financial statements for the period ended Sep 30.

CH Offshore said in a bourse filing that Falcon has bonds as well as a number of bank loans.

"Falcon's shares in CH Offshore have been pledged to one of the banks to secure the loan. Falcon's inability to meet its payment obligations to any one of the said banks may trigger cross default across all its bank loans, resulting in the possibility of a large block of CH Offshore's shares being forced-sold in the open market," said CH Offshore.

The firm said it granted the loan to Falcon after taking into consideration of its shares being forced-sold in the market by the bank, "which could destroy shareholders' value and create uncertainty in the market place regarding CH Offshore's continuing viability and equity support".

"In short, the loan to Falcon was in the best interest of CH Offshore and its shareholders."

CH Offshore added that it had made an announcement on interested person transactions, which include the loan, on May 9, when total interested person transactions exceeded 3 per cent of the group's 2016 audited net tangible assets.

The trade credit terms for Falcon is 30 days, and the loan is payable on demand, said CH Offshore.