Ezion-Yinson deal - a marriage made in heaven

BY most accounts, Ezion Holdings, one of many in Singapore's crisis-beaten offshore and marine space, is closing in on the finish line of a prolonged hazardous trek and could soon come out the other side weary but not defeated - and better still, bulkier.

After a drawn-out hunt, the company that has been hounded by debt and a cash crunch and steeped in red ink over the past three years, has found safe harbour in Malaysian-listed Yinson Holdings.

The somewhat convoluted proposal, that requires shareholders' blessings, will see Yinson play a bigger role than a strategic investor which Ezion had earlier alluded to. It essentially involves Yinson erasing some US$916 million in debt owed by Ezion and getting new shares in turn.

The end result - a lighter debt load - is no longer elusive for Ezion which will also be able to tap more capital of up to S$203 million under an options deal with Yinson, while Yinson will emerge as Ezion's controlling owner.

The latest news shifts the narrative for the company: it's almost a victory lap for Ezion as the agonising oil slump has been less kind to its sector peers that have been pushed into despair such as Swiber Holdings, Swissco Holdings and Ezra Holdings to name a few.

Ezion's spot of good news also preceded Monday blues in corporate Singapore after scandal-hit railway parts maker Midas Holdings, a former stock market darling, said it was facing insolvency as its search for a white knight had come up empty.

In "Ezion speak" - the company's statements almost always have a (refreshingly) religious tenor - it should count its blessings.

Evenly yoked

In more ways than one, the rescue deal will see the coming together of two companies listed on both sides of the Causeway that have been brought together in crisis but in fact, would have been a perfect match.

Ezion is majority owned, founded and led by Singaporean Chew Thiam Keng, an industrious and low-key personality who bought out a languishing electrical company in 2007 and transformed it into one of Asia's largest operators of liftboats or jack-up rigs - elevated vessels often used for well-servicing and maintenance works.

Yinson, under its founder, Malaysian entrepreneur Lim Han Weng, has a much bigger market capitalisation of some RM5 billion (S$1.7 billion). It has bloomed from a small logistics business in Johor Baru back in the '80s into a major marine player.

In 2014, Yinson stepped up its game with the buyout of Norwegian firm Fred.Olsen Production and became the sixth largest floating production, storage and offloading leasing company in the world.

Operations wise, Ezion and Yinson own complementary offshore marine assets that offer synergies to land more jobs in the energy market.

Ezion has operations in Singapore, Australia, rest of Asia and Europe, while Yinson has a presence in Malaysia, Vietnam, Singapore, Norway, US and Africa. You get the picture.

Counting blessings

Indeed, it is darkest before dawn.

Ezion's troubles have been piling up. A dramatic fall in oil prices had dried up new jobs while utilisation and charter rates have halved over the past three years.

Amid a credit crunch (bankers were averse to doling out more credit and taking on more risk given the sector's troubles), Ezion couldn't sweat its marine assets such as tugs, barges, workboats and jack-up rigs.

Consequently, after a record fiscal showing in 2014, things soured and between 2015 and 2018, Ezion made impairment losses of US$1.5 billion and as of end-2018, its balance sheet turned to a net liability of US$255 million.

That's not to say it had no breaks at all in between.

Last year, Ezion secured a US$2 billion refinancing package from lenders that provided it with a six-year runway and more time to hunt for a white knight. The deal also provided Ezion with a much-needed credit line for its business.

A helping hand was also extended by Temasek Holdings-linked Pavilion Capital Fund Holdings a year ago that resulted in Pavilion taking up a small stake in the troubled firm via a shares placement and options exercise.

In November 2017, Ezion won more time after bondholders allowed it to push back debt deadlines.

Now, Ezion is close to getting another shot at rebuilding its bruised operations as it seeks refuge in Malaysia's Yinson, one can safely bet that Ezion is grateful to "God almighty", whom the company has never failed to give thanks to in its annual reports, in good times or bad.