KrisEnergy bonds fall below 80 US cents amid debt covenant pressure

[SINGAPORE] KrisEnergy Ltd bonds are showing strain as the Singapore-based oil and gas producer said the industry slump could put its debt covenants to the test, as distress in the local-currency debt market spreads.

The company's S$130 million of June 2017 notes were at 79.95 US cents on the dollar yielding 37 per cent as of 11:24am local time, based on indicative bids compiled by iFast Corp, which operates a retail and wholesale bond portal. Investors traded the 2017 notes at 89.55 US cents on July 28, its data show.

KrisEnergy said on Aug 14 it's exploring equity issuance, refinancing and asset sales to strengthen its capital structure as debt covenants may come under stress after energy prices crashed in the past two years.

Swiber Holdings Ltd, an offshore oil and gas services firm, was put under interim judicial management earlier this month. The SGX Oil & Gas sub-index of 23 stocks, which include Swiber and KrisEnergy, has dropped 44 per cent since March 31.

"It will have a knock-on effect on the weaker upstream players," said Joel Ng, an analyst at KGI Fraser Securities in Singapore.

KrisEnergy also has a S$200 million bond due in August 2018, in addition to a US$148.3 million secured revolving credit facility with DBS Group Holdings Ltd, according to an investor presentation released Monday.

The note indicates that under the covenants, the firm's permissible fixed-charge coverage ratio will be two times from next year, from the current 1.5 times.

BLOOMBERG