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Ezion posts wider Q4 net loss, says potential rescue talks reach 'advanced' stage

A WHITE knight could be coming to the rescue of troubled offshore and marine group Ezion Holdings, which posted widening losses for the fourth quarter on Friday.

"The group is in advanced discussions with a potential strategic investor, with certain due diligence having commenced on the group," the board disclosed in a separate announcement on Friday.

The company is engaging in these talks "with a view to strengthen the group's financial position, improve the cash flow position of the group and preserve value for its stakeholders", it added.

The troubled Ezion, which had issued a profit guidance on Feb 4, has reported a post-tax loss of US$390.8 million for the three months to Dec 31, or 18 per cent deeper into the red than in the previous year, as revenue plunged by 33.5 per cent to US$29.7 million.

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An overall slump in charter rates across the fleet was named by the company as one of three key factors for the tumble in turnover, while credit woes accounted for the other reasons.

The board had warned in its profit guidance that a delay in finalising security documents for some secured lenders had "severely impacted" operations as Ezion could not draw down the funds needed.

These working capital constraints affected asset redeployment and led to a drop in liftboat and jack-up rig utilisation rates, the company has now said.

Also, shipyards, equipment suppliers and service providers have imposed tighter credit terms on Ezion - which, "coupled with the inability of the group to draw down the required funds from its secured lenders, has severely affected the group's ability to operate, maintain and deploy its vessels", it said.

Ezion's shrinking gross profit was then eaten into by a higher cost of sales and servicing - from maintenance for the vessels with delayed redeployment - as well as impairment losses on loans to joint ventures, plant and equipment, trade receivables and other receivables, and currency losses.

The group's losses per share stood at 10.54 US cents, down from 16.06 US cents before, on an enlarged share base from a debt-for-equity swop.

Meanwhile, Ezion chalked up a full-year net loss of US$344.3 million, or 6.6 per cent more than before, on a 38.5 per cent fall in turnover to US$118.7 million.

No dividend was recommended for the period, unchanged from the year before.

"The overall market conditions remain challenging for the group due to the uncertainty in the oil prices that have affected the group's clients as well as the persistent oversupply of certain marine assets like tugs, barges, workboats and jack-ups," Ezion said in its outlook statement.

"The availability of funds from the lenders will also be crucial to the group's ability to put its mainly production-related asset into deployment to meet the requirement from its clients. The management will continue to work intensely with the secured lenders on the drawdown of the required funds."

Ezion had US$1.6 billion in total liabilities as at end-2018, according to its latest financial statements. Its vessels have been pledged to financial institutions as security for term loans.

But by November 2018, the group had begun preliminary discussions with potential strategic investors on how to grow its liftboat market share and strengthen its financial position. One of these potential investors has now started doing due diligence on Ezion, the company said in its latest statements.

Ezion chairman Wang Kai Yuen and chief executive Chew Thiam Keng wrote in a letter to shareholders on Friday that the potential strategic investor must also agree on terms with secured lenders, and "we have received feedback that the discussions between the secured lenders and one particular investor group have been progressing well", but no conclusive agreement has yet been reached.

The board added in a bourse announcement on Friday that it has recommended an immediate trading suspension as the move would "provide market certainty and avoid market confusion as the company continues its focus to engage with the potential strategic investor".

"Given the current dynamic situation that the company is in, a trading suspension would avoid any irregular movement in share price and prevent any irregular trading activities that may result from the leakage of any information which the company has no control over," the board also said.

Ezion, which had called a trading halt on Wednesday, last closed at 4.3 Singapore cents.

Dr Wang and Mr Chew said that they would update shareholders on any further developments, adding: "In the meantime, we humbly ask for your kind patience and that you also keep us in your prayers."