SINGAPORE – The default of a PACC Offshore Services Holdings (POSH) joint venture (JV) on US$27.6 million (S$38.1 million) worth of debt has no material impact on offshore and marine group Ezion Holdings, the latter confirmed in a bourse filing on Friday (Sept 20).
POSH had announced on Thursday evening that the JV, POSH Terasea Pte Ltd (PTPL), was in default on the debt as at Sept 17.
PTPL is 50 per cent-owned by POSH. The remaining is held by Terasea, a separate JV between Ezion and Seabridge Marine Services. PTPL is managed by POSH, and Ezion’s effective interest in PTPL is 25 per cent.
The loan facility comprised ship financing loans and a revolving credit facility. It is secured by five anchor handling tugs owned by PTPL and its five subsidiaries. The creditor, a financial institution, has declared the full outstanding sum, including accrued interest, to be payable.
Ezion said on Friday that PTPL had been operating in market conditions “that have seen prolonged weakness and remain very challenging”. This comes amid the uncertainty in oil prices, which has affected national oil companies and multinational oil majors’ capital expenditure in exploration and drilling, the company added.
The event of default may also trigger cross defaults in other obligations of PTPL. To the best of Ezion’s knowledge based on the last information provided by PTPL, the total amount due, arising from the event of default and cross default, totals about US$34.2 million.
Ezion confirmed that the event of default and cross defaults do not have any material impact to the group. It also said it will keep its shareholders informed of any further developments.
Shares of debt-stricken Ezion are under voluntary suspension.
On Thursday, POSH said that in the worst-case scenario, it would have to recognise impairments for its interest in PTPL, worth US$27.6 million as at end-June, as well as the US$14.4 million due from PTPL to POSH as at end-June.