Mermaid Maritime takes US$8 million loan; pandemic, oil price drop expected to hit customer demand

MAINBOARD-LISTED offshore services provider Mermaid Maritime's wholly owned Thai subsidiary has inked a deal to borrow US$8 million from the Export-Import Bank of Thailand.

But a default event will occur if controlling shareholder Thoresen Thai Agencies' shareholding falls below 33 per cent of the company, Mermaid disclosed to the bourse on Sunday.

That's even as the group warned that it expects lockdowns and other restrictions from the ongoing Covid-19 pandemic - including in the key Middle Eastern market - to affect its results for the first half of 2020, despite a lack of any material adverse impact on its confirmed orderbook.

Mermaid disclosed that the group has already invoked a force majeure claim on a customer contract as virus-related restrictions delayed the return of a vessel, even though it provided a chartered-in replacement to the customer, to fulfil its contractual obligations uninterrupted.

The pandemic, as well as a plunge in global oil prices, is expected to fuel weaker demand for Mermaid's services in the near term on fiercer competition for a lower number of tenders.

"The impact of the pandemic and oil price levels is highly uncertain in terms of the length and depth of its economic impact," the group added, noting that it is early days yet.

"The company shall release further announcements as and when there are further material developments in its business and operations."

Still, Mermaid Subsea Services (Thailand) has entered into a facilities agreement to fund special periodic surveys for its two dive support vessels, which must be done every few years.

The vessels, which are key to the Mermaid group, must now head to the shipyard, complete maintenance programmes, and then return to their country of operations.

In the event of a default, the Export-Import Bank of Thailand could block further drawdowns of the loan, declare any drawn-down amount to be repayable immediately with default interest, or exercise all of its rights under security, among other possible courses of action.

But Mermaid affirmed that the condition for a default has not been breached, as Thoresen remains the company's majority shareholder.

The counter ended unchanged last Friday at S$0.058.