Following a request for bankruptcy protection by Singapore’s Ezra Holdings, Emas Offshore, an offshore services provider held by Ezra, will be facing a going concern issue in case it fails to refinance its financial obligations.
In order to facilitate the financial restructuring, Emas Offshore’s parent company Ezra Holdings filed the petition for reorganization at the U.S. court on Saturday. Ezra said that the moratorium afforded under its Chapter 11 filing stays claims against the Ezra Chapter 11 entities and enforcement actions against their assets.
Responding to the parent company’s move, Emas Offshore Limited said on Monday that, as at November 30, 2016, it had an aggregate amount of approximately $170 million owing to Ezra, of which $125 million was subject to a deferred payment over a period of three years.
In addition, the group has an aggregate of approximately $566 million of loans owing to financial institutions of which (i) an aggregate of approximately $242 million of loans are guaranteed or secured by securities provided by Ezra and (ii) an aggregate of approximately $193 million of loans are jointly guaranteed or secured by securities provided by Ezra and the group.
The group also has substantial charter hire liabilities valued at approximately $231 million as at November 30, 2016, relating to charterparty agreements entered into by the group of which (i) an aggregate of approximately $119 million are guaranteed solely by Ezra and (ii) an aggregate of approximately $58 million are jointly guaranteed by Ezra and the group.
Earlier this month, Emas Offshore got a notice of termination for the charter of the pipelay construction vessel Lewek Champion while Ezra, as the guarantor to the bareboat charter, received a demand for a payment of the termination sum of an aggregate $194.5 million within fifteen business days from the date of the notice of termination, ending March 30.
Several days later, Emas Offshore received charter terminations from the owners of two vessels, the Lewek Toucan and the Lewek Pelican, and a request for payment within ten banking days of the charter hire for the remaining charter period and re-delivery of the vessels to their respective owners.
‘Negative impact’ on Emas
According to Emas Offshore’s statement, the Ezra Chapter 11 filing may constitute events of default under the relevant facilities and/or the bank facilities and the charterparty agreements and the moratorium afforded under the Ezra Chapter 11 filing does not stay claims against the group in relation to these relevant facilities and/or bank facilities and charterparty agreements guaranteed or secured by Ezra.
However, the group said it is not aware of any demand made by financial institutions in relation to any of the bank facilities as a result of the Ezra Chapter 11 filing.
Emas Offshore further said that Ezra’s filing for bankruptcy protection may have a negative impact on the company. Therefore, Emas is currently seeking advice on the Ezra Chapter 11 filing, as well as assessing the impact of the filing on the group and on its ongoing initiatives to refinance its financial obligations and liabilities and the procurement of additional working capital facilities.
The company concluded that, in the event that these efforts do not achieve a favorable and timely outcome, it will be faced with a going concern issue.