Singapore millionaire, 77, joins bondholders in workouts

Three defaults in the past year and at least seven restructuring proposals have shaken Singapore’s reputation as an Asian finance hub

Jerry Tan, a 77-year-old retired Singaporean businessman, was among dozens of bondholders in the city who joined forces last week to submit their demands as more companies seek to restructure debt payments.
“The only way to put ourselves in a position of some strength is to come together as a group,” said Tan, who said he owns more than S$8 million (USD5.9 million) of notes. “The whole bond market is really bad and you can expect a lot more defaults. The authorities should step up to protect investors and Singapore’s reputation as a major financial center.”
Tan was among a crowd of housewives, former traders and entrepreneurs who gathered outside a trustee’s office to deliver a demand for immediate payment on S$100 million of notes issued by shipping trust Rickmers Maritime, which is seeking a debt-equity swap. A separate group issued a similar notice of acceleration on S$125 million of bonds sold by Malaysian oil services company Perisai Petroleum Teknologi Bhd., after talks on a reorganization broke down.
Three defaults in the past year and at least seven restructuring proposals have shaken Singapore’s reputation as an Asian finance hub, prompting the government to tighten oversight of private banks and aid businesses caught up in a global oil and shipping slump. The city is also reeling from a penny-stock crash, the worst quarter for home prices in seven years and the highest bad loans since 2009.
“For financially-savvy investors, they need to know what they’re buying into and not just look at the yields,” said Benedict Koh, a professor of finance at Singapore Management University. “In workout situations, they must acknowledge that a haircut is inevitable, get some independent advice and decide whether the discount is fair or too deep.”
Singapore’s high net-worth individuals rose 27 percent between 2009 and 2015 to 103,600, according to Capgemini SA, becoming major buyers of higher-yielding notes. While their ranks include former traders and executives, many were classed as wealthy investors based on the apartments they live in rather than their ability to absorb losses. Local-currency junk bonds fell 1.9 percent last quarter, according to an IHS Markit Ltd. index, the most in data going back to June 2012.
The Monetary Authority of Singapore said last month it is working to boost investor safeguards by year-end, while the government plans to enhance legal provisions for debt restructuring.
Rickmers isn’t expected to revise its debt-equity swap proposal despite the bondholders’ action, Soeren Andersen, chief executive officer of Rickmers Trust Management, the manager of the trust, said on Sept. 28. Its 8.45 percent notes were quoted at 35 cents on the dollar, according to DBS Bank Ltd. prices.
“So far, the company’s proposals have been most inequitable to bondholders,” said Jeffrey Sia, a retired trader who owns less than S$1 million of Rickmers bonds. “We will stand united to protect our interests.”
Perisai is offering an alternative proposal to bondholders after its plan to defer repayment of its S$125 million notes was rejected by bondholders on Monday, the day the notes were due. The company said Tuesday in an exchange filing it received a notice from the bond trustee that an event of default had occurred.
Investors that pool their holdings beyond a 25 percent threshold are allowed to make demands for immediate repayment. Perisai shares tumbled a record 28 percent in Kuala Lumpur.
“Yes, it’s our responsibility that we bought the bonds but the company can’t just brush us aside,” bondholder Cheng Fong Kiew said on Monday, after rejecting Perisai’s deferment plan.
Investors holding 25 percent of Pacific Andes Resources Development Ltd.’s S$200 million in defaulted 2017 notes, trading at 15 cents, are getting legal advice amid restructuring. Swiber Holdings Ltd. missed payments on S$460 million of bonds and the oil services provider said any liquidation outcome would return 2 cents on the dollar for unsecured creditors.
“Bondholders were treated very roughly” in recent cases, said Lee Ka Shao, a former hedge fund manager who now runs a family office in Singapore. “If bondholders are not in the know, they could be easily ran over because there is no platform for them to group and there is no process for going through a fair restructuring.” David Yong, Andrea Tan, Bloomberg