Ezra trading suspension leeway bound by MTN clause: market watchers

Singapore

EZRA Holdings is bound by a clause tied to its outstanding medium term notes (MTN) not to enter into a trading suspension exceeding a specified period even though its offshore support vessel-focused subsidiary, Emas Offshore Limited (EOL), has taken the suspension route on both the Singapore and Oslo exchanges, say market watchers.

Both Ezra - a mainboard-listed offshore and marine group - and EOL had in two separate disclosures on Thursday, warned against going-concerns issues. The OSV-focused subsidiary requested a trading suspension on Monday while its parent group resumed trading on Friday after having gone through several trading halts since early February.

One broker source suggested a "suspension of trading put" applying to Ezra's S$150 million MTN maturing in 2018 is likely to have prohibited the parent group from going for a trading suspension on SGX.

Bond specialist iFast explained that this basically suggests, in the event the trading of shares in the notes issuer, Ezra, is suspended for a continuous period of more than 14 days, noteholders are entitled to get their notes redeemed at par. Taking into consideration the group had US$34.02 million in cash and cash equivalents as at Aug 31 2016 and that it had been in negotiation with vendors to cancel certain contracts to conserve cash, it is unlikely to be in a position to redeem the outstanding notes.

Before market opened on Monday, EOL requested a trading suspension with immediate effect on SGX, following a disclosure over the weekend regarding an order issued by the Financial Supervisory Authority of Norway (FSAN) to suspend trading on EOL's stocks on the Oslo bourse from March 3 closing.

The trading suspension on the Norwegian exchange was attributed to a lapse in EOL's filing of its audited annual financial information for 2016. The original deadline for the filing was the end of 2016.

But EOL, in highlighting documentation for refinancing of its debts and securing additional working capital facilities, reiterated going-concern issues. It said it has sought extension to the original Q2 FY17 deadline from its principal bankers to complete the required documentation.

Ezra had requested four trading halts within a span of five weeks. Three of these trading halts that took place in February were pending announcements on a US$170 million impairment tied to its associate, Emas Chiyoda Subsea (ECS), a winding-up petition filed by a trade creditor that had since been withdrawn and a disclosure on, among other things, at least US$900 million in exposure to ECS.

In its latest disclosure late on Thursday, Ezra warned against an immediate going-concern issue in the event the claims in relation to guarantees that it has extended in support of ECS's loans, charter hire liabilities and projects are made against the group.

With over US$1 billion of debts repayable in one year or less compared to equity to controlling interest of US$232.98 million, analysts said Ezra needs fresh funding - preferably equity, if not debt - but since last November, no finer details have emerged on the group's restructuring beyond ECS's announced Chapter 11 filing and US$90 million of financing entering the subsea associate.

Ezra closed at S$0.013 on Monday, down 0.2 cent. EOL last traded at S$0.05 before entering into a trading suspension.