Ezion's refinancing illustrates the value of engaging stakeholders

LAST week's announcement by offshore and marine (O&M) firm Ezion Holdings that it has secured a landslide vote to refinance about S$575 million worth of notes and perpetuals was significant for two reasons.

First, because it offers hope that the company will be able return to a stronger footing in the months ahead or that the worst may be over for companies suffering from a prolonged slump in oil prices. And, second, for the lessons it holds for all other firms - whether from the O&M sector or otherwise - which might also be struggling financially and are considering similar debt restructurings.

The most important lesson is the value of being open and transparent, and that constant communication and engagement with stakeholders is crucial. Although these are undisputedly the hallmarks of good corporate governance and should be constantly practised, this is not always the case, especially in hard times when margins are under pressure, cash flows are constricted and profits vastly reduced. Under such conditions many firms tend to withdraw and adopt a defensive posture that typically involves minimal public disclosure and maximum secrecy. Material information is then withheld, mainly on the basis of the erroneous belief that the less the public knows, the less the potential damage to the company's image and therefore its share price.