Mencast Holdings strikes debt deal with key bank lenders

OFFSHORE and marine engineering group Mencast Holdings reached a deal with key creditors on Friday to restructure its debts, the board has announced.

Mainboard-listed Mencast, hit by a slump in the oil and gas industry, was forced to the negotiating table in 2018 after breaching financial covenants with bank lenders.

Now, the payment of the principal sums owed to DBS Bank, Ethoz Capital, RHB Bank, Standard Chartered Bank and United Overseas Bank will be suspended until the end of an unspecified restructuring period - even as the contractual interest remains due and default or penalty interest keeps accruing.

The debt restructuring agreement has a mechanism for repaying the principal sums, said the board, without giving more details. Meanwhile, the default or penalty interest will go away at the end of the restructuring period, as long as the deal has not been scrapped by an unfixable default.

Mencast had about S$189.9 million in bank borrowings as at Sept 30, 2018, most of it secured by its leasehold buildings, vessels, short-term bank deposits, trade receivables and corporate guarantees.

Under the restructuring arrangement, it will cut its debt by S$130 million by selling off properties and other assets. Any proceeds left over after certain loans have been addressed will be subject to a cash sweep - that is, free cash must go towards outstanding debt and cannot be redistributed to shareholders.

After the restructuring period, Mencast's working capital will be converted into a 24-month loan. It had S$9.57 million in cash and cash equivalents as at Sept 30, 2018, its third-quarter statements showed.

The board said that, over the past year, the group has been in talks and working closely with lenders to tackle its debt profile and working capital. It has also identified divesting under-used or non-core assets as a way to raise money for its debt and working capital needs.

Material updates on the debt restructuring will be given "at the appropriate times", the board added, in a statement signed by chairman and chief executive Glenndle Sim.

Mencast, which is on the bourse watch-list, lost 0.1 Singapore cent or 1.15 per cent to 8.6 Singapore cents on Friday before the latest debt restructuring update.