It was earlier reported that shipping company Pacific International Lines (PIL) is in financial stress (‘Netizens ask questions about Temasek’s indirect loan to Pacific International Lines‘). Two months ago (23 Mar), PIL admitted through Singamas, a public company it controlled, that it is in talks with several creditors to settle its huge debt, amid challenging conditions caused by COVID-19.
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.”
SS Teo awarded PBM
The MD of PIL Teo Siong Seng (known in shipping circles as SS Teo) is well known to the government. He is also the President and CEO of Hong Kong-listed Singamas. Teo was appointed a 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.
Given that PIL is in such dire straits as well as Teo’s prominence with the government, many in the industry wondered if Temasek, Singapore’s state-owned sovereign wealth fund, will step in to help PIL. Container News wrote, “His (Teo’s) connections have led to speculation that Temasek may provide a lifeline to PIL.”
Container News approached Temasek last week 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).
Temasek to save PIL
However, in a statement yesterday (26 May), PIL now said that it is in talks with a unit of Singapore state investor Temasek Holdings for a potential investment. It revealed that it had entered into a six-month exclusive agreement with Heliconia Capital Management, a fully-owned subsidiary of Temasek, regarding a potential investment into PIL to keep it afloat.
It added that it had also obtained in-principle approval of financial lenders to defer principal and interest payments until end of this year, Dec 31. “Due to the situation, the company had commenced discussions with 15 of its financial lenders with a view to concluding a formal agreement concerning a debt-reprofiling plan with these stakeholders,” PIL said.
“Despite the company’s best efforts, the persistent Covid-19 pandemic has caused the situation to worsen over the past month.”
Temasek’s Heliconia confirmed it is in talks with PIL but declined further comment. PIL didn’t say how much money it was seeking from Temasek.
WSJ reported that DBS Bank is one of PIL’s biggest lenders, with a US$260 million exposure, and Bangkok Bank in Thailand is owed US$220 million. Temasek-linked entities are also owed around US$140 million (‘Singapore’s PIL Seeks Temasek Investment for Survival‘).
Temasek has largely stayed out of shipping investments since selling Neptune Orient Lines (NOL) to France’s CMA CGM SA in 2015 for $2.4 billion. But if it decided to invest in PIL, it looks like Temasek is getting back into shipping business again with public money.
One then has to ask why sell NOL incurring huge losses in the first place? Also, why choose to save PIL and not, say, Hyflux?
Whatever Temasek decides, it needs to be transparent and explain to the public carefully since public money is at stake here.
Incidentally, the Chairman of Temasek’s Heliconia is Lim How Teck. He is said to have an in-depth knowledge of the shipping industry, having been with the NOL Group from 1979 to 2005 where he held various positions such as Executive Director, Group CFO, Group COO and Group Deputy CEO at NOL.