OSV players in dire straits want early govt help, suggest ways to rescue them

Singapore

MANY small to mid-cap offshore support vessel (OSV) companies are facing a severe working-capital crunch, even as the government indicated possible support for the struggling marine & offshore engineering sector, industry sources told The Business Times.

Minister for Trade and Industry (Industry) S Iswaran on Monday revealed that the government is looking into the need for measures to help the industry. International Enterprise Singapore is understood to have proposed for the government to absorb up to 80 per cent of the risk associated with each new project loan extended under its International Financial Scheme. However, this is not intended to help meet day-to-day working-capital needs of cash-strapped companies.

Swissco Holdings chairman Lim How Teck said it is not realistic to expect the government to pump in new equity to plug the hole. Swissco, like many listed OSV players, has embarked on debt restructuring to deleverage its balance sheet. But Mr Lim said any form of government support should come sooner than later. "We are holding our breath but we cannot hold for too long," he said in a recent interview with BT.

Industry players, while welcoming the idea of project funding support, wondered if banks, having been spooked by an increasing volume of defaults in the sector, will indeed step up to extend new project financing.

Pareto Securities Pte Ltd chief executive David Palmer suggested extending forward factoring for receivables. This means offshore & marine players stand to encash in advance receivables from a new contract.

The government agency providing the forward factoring service can charge an interest on the advance cash extended, Mr Palmer explained.

Even with project financing aid for OSV players, Singapore may still stand to lose out as the hub for their regional operations, a listed OSV player warned. "It is definitely cheaper to move operations to where demand for the services are. In this respect, Kuala Lumpur being home to Malaysian national oil company, Petronas, is clearly better positioned than Singapore," said the player.

Mr Palmer said one key motivation for major international OSV players to move their operations out from Singapore is cost rationalisation and regional consolidation. He believes job losses can be mitigated if the government can look into grants or incentives towards employment of Singaporeans in the sector.

Mr Palmer also raised the importance of guarding Singapore's reputation as a level playing field. He argued any grants or incentives from the government should also be extended to foreign companies based out of Singapore in the sector, not just local firms. He sees the pledge by the Organization of the Petroleum Exporting Countries towards an output cut as a positive sign for the offshore & marine sector. But with the huge supply overhang clouding the OSV segment, he projected a recovery will be possible only from 2020 or beyond.

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