Time is running short for Triyards

EMAS Offshore (EOL) and Triyards are both subsidiaries of erstwhile stock market darling Ezra Holdings. Although of the same pedigree, one will be hoping not to share the same fate as the other.

Last week, the court moratoria shielding EOL and its subsidiaries from creditors' claims expired after Baker Technology backed out of a plan to raise US$50 million in rescue financing for EOL.

This effectively leaves EOL at the mercy of its creditors, said US law firm Gibson Dunn's partner Robson Lee, who noted that there is now nothing to stop creditors from pursuing legal action against EOL, including - in the worst case scenario - winding up the company.

Just days after EOL's court moratoria expired, Triyards disclosed the receipt of a balance US$3.8 milion from a US$5 million loan pledged by Ferrell Vanguard Fund SPC. With this move, Ferrell has effectively gained a 180-day exclusivity period to draw up a comprehensive restructuring plan for Triyards.

Taking these disclosures at their face value, it would seem the door has closed on one Ezra subsidiary but opened for another.

But if one bothers to look back on the chain of events leading up to and following from Ezra's Chapter 11 filing, EOL has been worse off from the beginning.

It embarked on a debt revamp months before Triyards because the latter was still able to report profits for a longer period before succumbing to this protracted industry downturn.

It doesn't help that with the offshore support vessel (OSV) sub-sector beset by overcapacity, it could be years before EOL is able to return to profitability. This is unlike the situation at Triyards - which has been able to diversify its order book and win shipbuilding contracts for non-oil and gas vessels.

But surely being a seasoned offshore and marine player, Baker Tech ought to be well aware of the state of affairs in the OSV segment.

Going by recent events, it doesn't seem as if Baker Tech has backed away from the troubled sub-sector after making public its withdrawal from a rescue package for EOL. On the contrary, it has pressed on with a buyout offer for CH Offshore, another listed OSV player.

M3 Marine's managing director Mike Meade gave a possible explanation. Acquiring CH Offshore makes more sense for Baker Tech because it offers better equipment, better reputation and better fleet utilisation than EOL, he said.

So now that the end is nigh for EOL, all eyes are now on Triyards. The yard operating arm has wasted no time in announcing further assistance from its potential white knight: Ferrell Vanguard has placed orders that resulted in almost US$2 million of injections into Triyards' subsidiaries. But Ferrell's moves have not inspired confidence among all creditors or in Vietnam, which hosts the bulk of Triyards' shipbuilding assets.

A supplier allegedly owed hundreds of thousands of dollars by Triyards speculated that the yard group would easily require tens of millions of US dollars to restructure its debts. Triyards has maintained last week that Ferrell is expected to draw up a restructuring plan that will lead to no less than US$50 million in new debt or equity injections.

That has not assuaged fears among Triyards' stakeholders. As a sign of public sentiment running high against Triyards in Vietnam, one reader there said the yard group is expected to face more lawsuits and claims from many suppliers and lenders.

Triyards has already had to fend off a winding-up petition from a trade creditor and is facing, among others, claims from certain lenders amounting to about US$80.1 million. The yard group also needs to rebuild staff morale shaken by months-long delays in salary payments. One local news report said Saigon Shipyard, a subsidiary of Triyards, has just paid up tens of billions in Vietnamese dong of social insurance owed to over a thousand workers. In the midst of the confusion in Vietnam, a client has terminated a US$25.5 million shipbuilding contract with the yard group.

While Triyards appears to be on a firmer footing than EOL, it is clearly not out of the woods yet. Time is running short. Ferrell has plenty more ground to cover if it wants to turn around Triyards.