In a perfect storm, will Nam Cheong scheme creditors take a leap of faith?

CREDITORS of Nam Cheong, including holders of Singdollar notes, will cast their votes next week on three schemes filed in Singapore and Malaysia to facilitate the group's debt restructuring.

The debt revamp is in turn, aimed at giving the group extra time to tide over the rest of the current offshore and marine (O&M) downturn.

As at June 30, 2017, the group had RM2.44 billion (S$814.75 million) in current liabilities, compared to RM1.33 billion of current assets.

The situation is even more dire at the company level. Its current liabilities amounted to RM1.15 billion against just RM60.93 million of current assets.

Four years into the O&M downturn, Nam Cheong is akin to a ship trying to sail through stormy waters but with large holes in the hull punctured by mounting liabilities and a core business that is no longer viable. Scheme creditors have to decide whether to help Nam Cheong plug the holes by agreeing to debt-to-equity conversion for non-sustainable debts, taking on the implied haircuts for sustainable debts by accepting either a proposed cash payout or an exchange into a loan that will term out repayment of the debt for another seven years. Or if they conclude that the ship is beyond rescue, the alternative is to abandon ship, i.e. vote against the scheme. If at least 25 per cent of creditors in value o…