Wiluan family loses bid to stop JM order on KS Energy

Singapore

A SECOND attempt by Indonesia's Wiluan family to fight OCBC's bid to place KS Energy and a key unit under judicial management (JM) failed on Tuesday.

In a two-hour JM hearing at the Singapore High Court that was hotly contested by the management of the beleaguered firm, Justice Aedit Abdullah granted OCBC's application and placed a JM order over the ailing Singapore-listed oil services firm.

The court appointed Deloitte & Touche's Andrew Grimmett and Lim Loo Khoon as judicial managers of KS Energy and a key operating subsidiary KS Drilling (KS Companies). Both were earlier, on Aug 31, appointed the group's interim judicial managers (IJMs).

The latest development is a major blow to Indonesian tycoon and KS Energy founder Kris Wiluan, who had resisted the JM bid, and is separately facing 112 charges of alleged false trading and market rigging.

Mr Wiluan, 71, an Indonesian citizen and Singapore permanent resident, had described OCBC's attempt to use the criminal charges filed against him as a basis for its JM application as "disingenuous" as the firm's share price had nothing to do with OCBC's loan facilities.

His son, Richard Wiluan who is the firm's current chairman and chief executive, has also vehemently fought the JM bid by OCBC, the firm's super-majority creditor which holds over 84-86 per cent of the total liabilities of KS Energy and its subsidiary.

Both father and son together own nearly 66 per cent of mainboard-listed KS Energy. Trading in the shares of the offshore and marine firm that provides drilling and rig services as well as specialised engineering and fabrication, has been suspended since Aug 12.

In August, OCBC applied to place the mainboard listed firm and its unit under JM after it sent letters of demand to the firms as well as six other subsidiaries for a US$230.7 million term loan and a S$5 million bridging loan to KS Drilling. KS Drilling is an 80.09 per cent-owned subsidiary of KS Energy, which has provided US$150 million in guarantee for the term loan.

Sarjit Singh Gill SC and Daniel Tan from law firm Shook Lin & Bok are lead counsel for the bank.

In a second affidavit filed in late September (post-appointment of IJMs to the firms on Aug 31), Mr Richard Wiluan claimed that both OCBC and the court-appointed officers failed to appreciate the firm's operational needs and lacked a commitment to its rehabilitation.

He went as far as accusing OCBC of engineering a default, saying the lender's real intention was to wind up the firms. OCBC denied the allegations as "frivolous, baseless and irrelevant" and said it did not care to engage in a "tit-for-tat exchange", in its reply affidavit filed earlier this month. In fact, the lender stressed that JM was the "least drastic" option given that it could have sought to wind up the the firms as they were "hopelessly insolvent" or appoint receivers for their rigs.

"Either option would have been a death knell for the KS Companies," said OCBC in court documents.

As for the IJMs, Mr Wiluan alleged that they were too focused on recovering the funds for OCBC at the expense of other creditors. In addition, given the IJMs' inexperience, he said the company was losing time and missing tenders opportunities to land suitable projects.

In his reply affidavit, Mr Grimmett said no tenders have been launched on the opportunities brought to the IJMs attention by the management. Furthermore, he said that these opportunities may not be viable given the group's lack of financial resources as they involve substantial upfront cost.

He added that the IJMs have concluded that the KS Companies would not be able to continue as a going concern without a comprehensive business and debt restructuring under OCBC's auspices.

In an IJM report dated Oct 8, the court-appointed managers said it would consider KS Energy's listing status as an asset that can be of interest to potential investors, be it parties in a similar industry who may be interested to acquire its existing business or those seeking a back-door listing.