Pacific International Lines (PIL) faces liquidation as a mounting debt burden, dwarfing the value of its assets, drags the company further into the mire.
Management at the struggling Singaporean operator disclosed more red ink during a meeting with bond holders on 11 November, revealing that net losses widened to US$795 million due to one-off impairment losses of US$590 million in 2019, while its losses were US$254 million In 2018.
A second financing tranche, amounting to US$600 million, will comprise a mix of debt and equity investment. The proceeds will also be used to repay the earlier US$112 million facility, said the management.
As at 31 December 2019, PIL had total debts of US$3.3 billion and its pledged assets are inadequate to honour its obligations to secured creditors. PIL has been in talks with financiers to reprofile its debts and in the second quarter of 2020, secured a moratorium on principal and interest repayments.
Advising bond holders that PIL faces liquidation without comprehensive restructuring, management said that once the funding is secured, PIL will implement restructuring via a scheme of arrangement under Singapore’s Companies Act. Such a scheme would see the company enter into a compromise or arrangement with creditors, including bond holders, which will bind any non-consenting minority parties.
Such a restructuring would be put to the vote and will be approved if votes are won from at least 75% of creditors who turn up at the session.
PIL’s management blames capacity oversupply, reduced freight rates and high bunker prices for the company’s poor performance since 2018.
PIL is finalising bailout discussions with Heliconia Capital, a unit of the Singapore government’s investment company Temasek Holdings for the second round of financing. PIL has applied to Singapore’s High Court to seek protection from its creditors while it finalises the second tranche.