Problems mount at Ezra Holdings – US$170 million write-down anticipated

Referring to a number of recent stories in the press, the board of directors of Ezra Holdings Limited has issued a statement, in which it anticipates being hit by a massive write-down and concludes that, unless it can complete the restructuring process on which it has embarked it may no longer be a going concern.

The board wanted to clarify that the company is assessing the impact of the write-down and anticipated downgrade of investments in Emas Chiyoda Holdings, (in which it has a 40 per cent stake) and subsidiaries and loans extended to Emas Chiyoda Group by its joint venture partners, Chiyoda Corporation and Nippon Yusen Kabushiki Kaisha. The company’s investment in, shareholders loan to and inter-company balances owed by the Emas Chiyoda Group amount to US$170 million and the full amount may have to be written down. The group had recorded a net current liability position of US$887,220,000 for the financial year ended 31 August 2016.

The board clarified that EMAS-AMC AS, a subsidiary of Emas Chiyoda Subsea, as the charterer of the vessel Lewek Inspector, which is owned by Forland Subsea AS, had defaulted on payment of charter hire for October 2016, due for payment on 30 November 2016. While EMAS’ obligations under the charter are guaranteed by the company, Forland Subsea AS has since agreed not to pursue repayment of the default and has not called upon the company as guarantor to repay the Forland default. EMAS, being the charterer of the vessel Lewek Connector, has also entered into a short-term standstill agreement relating to the repayment of the bareboat charter of the vessel with Ocean Yield ASA for the months of December 2016 and January 2017. In addition, the board said it wanted to clarify that the company “has no dispute with Bibby Offshore.” Bibby Offshore’s claims are against Emas Chiyoda Subsea, which the company does not control.

Ezra Holdings said that efforts to review options to preserve value for the group are continuing. “In light of the severe and protracted downturn in the global oil and gas industry, the group will continue to work with its advisors to review all options to restructure its businesses, operations and balance sheet,” it said. “As part of the restructuring, the group receives, from time to time, letters of demand as well as reservation of rights letters from its counterparties, including a statutory demand issued by one of the company’s lenders. The company also has various obligations owed to financial lenders and trade creditors that will fall due from time to time such as the interest payment on its S$150 million (US$106 million) 4.875 per cent notes which will fall due in April 2017.”

Ezra said the group is in regular discussions with a number of its substantial creditors and has had dialogues with its key stakeholders, including its financial lenders and trade creditors. The company recognises that certain members of the group are independently managed and, as such, the most appropriate form, as well as the timing, of restructuring applicable to each member of the group will ultimately have to be decided by the board of directors of that particular entity.

Apart from EMAS Offshore Limited, no other definitive agreements in relation to the restructuring have been entered into by the group as at the date of its announcement. “There can be no assurance or reasonable certainty that any discussions or any restructuring options will materialise or be successfully concluded,” said Ezra, “and in the event the restructuring not being completed in a timely manner, the company and the group will be faced with a going concern issue.”