Trade payables pile up at Triyards' Vietnam unit

Singapore

TROUBLED Triyards Holdings' subsidiary in Vietnam is facing difficulty paying its suppliers even after delivering its shipbuilding projects - a signal of the mounting liquidity crunch that has beset the yard-operating arm of financially distressed Ezra Holdings.

The Business Times understands that Triyards' subsidiary Strategic (V) Marine Co has in fact run up trade payables that are over a year old.

Privately-owned Can Traders & Services filed a writ of summons two months ago against Triyards' unit for a claim of over US$81,000 tied to the supply and installation of marine electronics for a shipbuilding project which is said to have been delivered to the end client.

Another supplier who declined to be named chose to write off hundreds of thousands of Singapore dollars that he claimed Strategic (V) Marine allegedly owed his firm for more than two years to avoid pursuing a "costly" cross-border legal action.

Triyards did not respond to BT queries on the matter.

The case by Can Traders & Services, which was first filed in Singapore's High Court in May against Strategic (V) Marine, was concluded around mid-July with court documents indicating that the defendant settled the outstanding claim with the plaintiff as at July 12 - more than 18 months after Can Traders & Services allegedly supplied goods to Strategic (V) Marine.

This may well represent just the tip of the iceberg of the cash flow woes that is afflicting Triyards' unit.

In early July, Triyards acknowledged to BT that it had struggled to pay salaries in Vietnam after "facing difficulty drawing on project financing lines".

CEO Chan Eng Yew had then described the trouble with salary payments as "cascading effects" from the default of banking facilities guaranteed by Ezra Holdings, which filed for Chapter 11 protection in the US court in March 2017. The Triyards CEO did not respond to BT's latest request on Thursday for comments.

But observers said the yard operating arm's financial woes have also piled up because the company and its subsidiaries have "under-priced" bids against competitors to win shipbuilding projects and keep the order books rolling.

Triyards last reported a net loss of US$162.5 million for the 12 months ended Aug 31, 2017, but did not provide any updates thereafter on how its finances fared with the execution and delivery of its remaining shipbuilding projects. A trade creditor who still has ongoing deals with Triyards' subsidiaries said that suppliers should have been warned of the potential financial risks given that the subsidiaries have been widely perceived to have been low-balling their bids.

Triyards had sought new equity and debt financing from investors to alleviate its working capital crunch but it has achieved limited progress on this front.

In February, it said that it did not receive the balance US$3.8 million of a US$5 million loan Ferrell Vanguard Fund SPC had pledged as a short-term loan. Ferrell Vanguard was then granted a 180-day exclusivity period to conduct satisfactory due diligence, propose and conclude a comprehensive corporate restructuring for the yard group. The US$5 million pledged by Ferrell Vanguard was meant to tide over Triyards' working capital needs including settling outstanding salaries in Singapore and Vietnam.

The marine arm of ST Engineering and Australia-listed Austal had expressed interest to acquire Strategic (V) Marine, but negotiations appeared to have stalled, sources said. Austal's CEO David Singleton confirmed to BT that the shipbuilding group has made "several formal and informal offers . . . to both buy the Strategic Marine business or other Triyards businesses in Vietnam in whole or to sublease under-utilised facilities". He added however, that none of these "were taken up" and Austal subsequently went ahead to establish its own shipbuilding operation in Vung Tau, Vietnam.

Ezra had pledged its shares in Triyards back in July 2016 to bank lenders, OCBC and DBS, in exchange for S$100 million of bank borrowings. Sources suggested that Triyards may have turned to OCBC and DBS for a lifeline. When contacted, both banks declined comment.