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POSH faces maximum US$42m impairment with JV's loan default

MAINBOARD-LISTED PACC Offshore Services Holdings (POSH) could face a maximum impairment charge of US$42 million, following the default of its 50 per cent-owned joint venture (JV) on US$27.6 million worth of debt as at Sept 17.

In a bourse filing after market close on Thursday, POSH identified the JV in question as POSH Terasea Pte Ltd (PTPL). The remaining 50 per cent of PTPL is held by Terasea, a separate JV between debt-stricken Ezion Holdings and Seabridge Marine Services.  

The extent of the financial impact cannot be fully ascertained at this point, POSH said in its filing. But in the worst-case scenario, POSH would have to recognise impairments for its interest in PTPL, worth US$27.6 million as at end-June, as well as the US$14.4 million due from PTPL to POSH as at end-June. 

The loan, comprising ship financing loans and a revolving credit facility, is secured by five anchor handling tugs owned by PTPL and its five subsidiaries. The creditor, a financial institution, has declared the full outstanding sum, including accrued interest, to be payable.

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The Business Times understands that POSH had explored options to rescue PTPL, such as a possible capital injection from shareholders. 

Despite the potential impairment, POSH does not expect the default to impact its operating cash flows, given its debt headroom, or undrawn amount from borrowing facilities of about US$90.4 million.

The company operated a combined fleet of 122 vessels as at end-June, of which nine were operated by PTPL and its units. PTPL did not contribute to POSH's positive EBITDA of US$24.5 million for the six months ended June, POSH added in its filing. 

In a separate statement sent to the media, a POSH spokesman said: "We regret the circumstances as POSH had been committed to exploring options with all parties to enable the (PTPL) JV to meet its obligations towards lenders."

The latest developments come as POSH announced a comprehensive review of its business in August, following its gloomy Q2 results. The company's net loss for the quarter widened by 49 per cent on-year to US$8.6 million. It had US$16.5 million in cash and US$782 million in borrowings as at end-June. 

POSH shares closed flat at S$0.125 on Thursday.