(Reuters) DBS Group Holdings, Singapore’s biggest bank, made two loans to oilfield services firm Swiber Holdings totalling US$146m weeks before the company filed for liquidation, according to court documents seen by Reuters.
The loans, which account for 27% of DBS’s exposure to Swiber, raise questions about how well creditors to the troubled oil and gas services sector have been communicating with their borrowers and whether they were sufficiently aware of potential risks.
Underscoring the confusion surrounding Swiber, the firm on Friday said it was no longer planning to wind itself up but would, with the support of DBS, instead seek judicial management, attempting to regain financial health under court supervision.
“As shareholders, we were a little surprised at the level of exposure to a single entity in a precarious sector and by the recent additional bridging loan with, as it turns out, equally precarious safeguards,” said Christopher Wong, senior investment manager in Aberdeen Asset Management Asia Ltd which owns DBS shares.
The two loans, made in June and July, were used to redeem maturing bonds, an affidavit filed by Swiber chairman and founder, Raymond Goh, showed. DBS, which has a total exposure of S$700m (US$523m) to Swiber, was also the main underwriter of Swiber’s corporate debt.
Asked about the two loans, DBS said in a statement that it had provided financing in the form of a bridging loan to be repaid upon an expected equity injection from an investor.
“Swiber’s projects financed by DBS were on track, and it had no overdue payments with the bank,” it added.
DBS is scheduled to report second-quarter earnings on August 8. Its shares were down 0.5% in late afternoon trade and have fallen 7.2% since Swiber’s news came out early on Thursday compared to a 4.2% decline in the benchmark index.
Swiber’s woes have sparked much angst about the outlook for the sector and Singapore’s banks.
“The Swiber incident raises concerns that the current low credit costs incurred by the three Singapore banks on their oil and gas exposures will rise and weigh on their profitability in the second half of 2016,” said Simon Chen, senior analyst at Moody’s Investors Service.
More borrowers may face cashflow strains and approach the banks for loan restructuring, he added.
Swiber’s court filing also highlighted a delay in payment by UK-based fund AMTC, which had agreed to a US$200m deal to buy preference shares in a Swiber subsidiary.
On July 20, Swiber’s board decided it would file for compulsory liquidation if the AMTC payment was not received by July 26. AMTC did not respond to a Reuters request for comment.