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Nam Cheong to 'temporarily cease' all debt repayments

Malaysian shipbuilder Nam Cheong intends to "temporarily cease" all debt repayments, including a bond coupon payment due on Sunday in a final bid to conserve cash and avoid liquidation.

It is the latest firm in the marine sector to suffer the savage fallout of protracted low oil prices. The company had run up RM1.84 billion (S$587 million) of outstanding debts at the end of March, versus a cash balance of RM116 million.

Nam Cheong used to build offshore support vessels (OSVs) speculatively in the days of peak oil, betting orders would roll in as long as OSVs were in short supply.

Now, three years into the oil price rout, buyers have disappeared and Nam Cheong is stuck with about 74 vessels at different stages of construction.

Most of these vessels had been subcontracted to shipyards in China. The firm said it is trying to cancel or delay delivery of the vessels.

Under liquidation, however, its deposits would be forfeited and the unbilled contract sum of about US$770 million (S$1.05 billion) would be payable immediately.

To avoid liquidation, Nam Cheong intends to put in a scheme of arrangement with all bank lenders and bondholders under court supervision where creditors vote as a group on the settlement.

The restructuring plan is thin on details. Nam Cheong plans to sell assets to repay its secured bank lenders as much as it can.

For the rest of its debts, it is seeking a moratorium on principal repayments and asking creditors to accept a haircut, as well as a conversion of their debt into equity.

Bondholders would also be paid all of the $19.5 million in the firm's Interest Service Reserve Accounts, equal to two coupons. -THE STRAITS TIMES

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