Last Tues (26 May), after months of speculation by industry analysts, the debt-ridden Pacific International Lines (PIL) finally disclosed that it is in talks with a unit of Singapore state investor Temasek Holdings for a potential investment (‘PIL finally admits it is in talks with Temasek’s unit for 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. Temasek’s Heliconia confirmed it is in talks with PIL but declined further comment.
In a media report today (1 Jun), it was further disclosed that the amount of the investment from Temasek’s unit would be at least US$400 million (S$565 million). Heliconia would take a combination of equity and debt in the struggling PIL. This came from preliminary discussions between the Temasek’s unit and PIL.
According to sources, the reason given for the investment into PIL is to help “secure logistics for food supplies” to Singapore amid the coronavirus pandemic. That being the case, it was a pity Temasek decided to sell off the state-owned Neptune Orient Line (NOL) to the French just a mere 4 years ago (2016).
PIL under financial stress
PIL is currently under tremendous financial stress.
According to Alphaliner, a company which specializes in providing worldwide data and information on shipping, PIL’s total outstanding debt is “worrisome”. It said, “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.”
In 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.”
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‘). Besides bank debt, PIL has a $60 million bond that is maturing in November.
PIL has said there are likely to be events of default under its financing agreements including under the terms of the bonds. It has started talks with more than a dozen of lenders and has obtained agreement from holders of 97.6 per cent of its debt to defer repayments for the rest of the year, it said. It has been selling its vessels in the past year as well as a subsidiary as part of its efforts to raise funds to ease its financial pressure.
Temasek’s Heliconia is best known for its relatively early-stage investments in growth companies. In an interview last year, its CEO said that Heliconia had more than $1 billion in assets under management with “significant” dry powder that would be aimed at taking growth companies in Singapore to the global stage. But it is noted that the debt-ridden PIL is already a mature company operating in the mature shipping industry.
SS Teo awarded PBM
In any case, the MD of PIL Teo Siong Seng (known in shipping circles as SS Teo) is a well known figure 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.