S S Teo (right).

It was earlier reported that shipping company Pacific International Lines (PIL) received loans from Temasek last year. In return, PIL pledged its 20.56% holdings in Hong Kong-listed container manufacturer Singamas, to Temasek as collateral (‘Singapore-based maritime carrier PIL received loans from Temasek Holdings last year, sovereign wealth fund holds shares in company as collateral‘, 16 May).
PIL is a private company and has no obligation to disclose anything publicly. However, Singamas which is controlled by PIL, is a public company. Hence, any changes or potential changes to its shareholdings need to be announced to the public. It is through one of these disclosures by Singamas that we get to know about Temasek’s involvement with PIL.
In a public disclosure to HK Exchange last May, Singamas admitted that Temasek, through 100% owned SeaTown Lionfish Pte Ltd, lent money to PIL and as such, now has direct interest in Singamas based on the 20.56% Singamas shares pledged by PIL.

PIL in financial stress

PIL appears to be in deep financial stress. Two months ago (23 Mar), MD of PIL Teo Siong Seng (known in shipping circles as SS Teo) admitted that the company is in talks with several creditors to settle its huge debt, amid challenging conditions caused by COVID-19. This revelation was made publicly through again, Singamas, the public company PIL controlled. Incidentally, SS Teo is also Chairman and President of Singamas.
The reason why Singamas needs to disclose this is because PIL also owed money to Singamas, so much so that it affected Singamas profitability. It was reported that PIL owed US$147 million to sister company Singamas. Singamas said, “The aggregate amount of trade receivables due from the PIL Group to the Group [Singamas] in relation to such services and containers is US$147,423,000, a majority of which is overdue.”
“The company understands that the PIL group is discussing with its other creditors for similar arrangements amid the challenging market conditions and recent global impact by COVID-19, the discussion is progressing well with good supports from the creditors,” it added.
Since last year, PIL was reported to have been selling several of its ships in order to boost its balance sheet. And on 13 Mar, it sold one of its subsidiaries, Pacific Direct Line, to Neptune Pacific Line. Container News reported that PIL’s loss widened to US$203.32 million in 2018, from US$141.18 million in 2017, becoming one of the most under-performing liner operators.
According to Alphaliner, a company which specializes in providing worldwide data and information on shipping, it said that PIL’s total outstanding debt is worrisome. “More worrisome for PIL is the total debt outstanding of $3.46bn as at June 2018, of which $1.08bn was short term debt payable within 12 months,” Alphaliner observed.
Last month (Apr), PIL even came out to issue a strong statement denying rumours of bankruptcy. It said, “Recently, there have been rumours circulating on social media, making false claims about a potential bankruptcy of Pacific International Lines (“PIL”). PIL would like to clarify that these rumours are totally false, and the information and content derived therefrom are unfounded.”
Given PIL is in such dire straits, many wondered if Temasek will “help” PIL further. Container News approached Temasek to ask if it may provide “a lifeline” to PIL. However, a spokesperson for Temasek told Container News that the firm does not comment on “speculation or hypotheticals” (‘Singaporean state investment firm Temasek mum on PIL bailout‘, 22 May).

Netizens question Temasek’s loan to PIL

In any case, with regard to Temasek’s loan to PIL through SeaTown Lionfish Pte Ltd, some netizens have started to scrutinize the actions of Temasek.
According to Bloomberg, Temasek’s SeaTown Lionfish is an institutional investment manager. Can then SeaTown operate like a bank lending money to others by taking on asset collateral?
Blogger Pat Low asked on his blog if a fund management company can get into the “business of lending”? He thought this could be a breach of directors’ duty under the Companies Act. Commercial lending would require a licence from the Monetary Authority of Singapore (MAS).
But Temasek can claim that this is merely a one-time “friendly loan”. Pat Low then countered, “A friendly loan is acceptable provided a relationship exists between the borrower and lender, such as subsidiaries or related companies, or where certain benefits accrue to the lender.” In this case, it’s unclear what relationship exists between Temasek or SeaTown Lionfish with PIL.
Given the poor financial health of Singamas, why take a collateral whose valuation is going to be significantly depreciated? Pat Low further asked. Temasek appears to be throwing good money after bad ones in the loan deal with PIL, unless there is a bigger game in play like taking over PIL later.
There is also a question of why choose to rescue PIL and not, say, Hyflux? If it’s to renter the shipping business again, why Temasek disposed Neptune Orient Lines with huge losses in the first place?
Whatever Temasek decides, it needs to be transparent and explain to the public carefully since public money is at stake here.

SS Teo awarded PBM

SS Teo who runs both PIL and Singamas is no stranger to Singapore. He is well known to the government. He is a former Nominated Member of Parliament (NMP) from 2009 to 2014 and Chairman of the Singapore Chinese Chamber of Commerce and Industry (SCCCI) from 2009 to 2013. He is currently the Chairman of Singapore Business Federation.
He also holds several other appointments including Board Member, Duke-NUS Graduate Medical School Governing Board; Board Member of Sino-Singapore Guangzhou Knowledge City Investment Development Co. Ltd; Director, Business China; Independent Director, China Shipping Container Lines Company Ltd; and Standing Council Member, China Overseas Exchange Association, Beijing.
When he was Chairman of SCCCI, he helped endorse Dr Tony Tan’s presidency in 2011. Teo was awarded the Public Service Medal in 2010 and the Public Service Star (PBM) last year.

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