SINGAPORE (July 15): On June 19, KrisEnergy put up some proposals for discussion with its creditors. These creditors are DBS Bank which has provided the company with a revolving credit facility (RCF), Keppel Corp, through Zero Coupon Notes (ZCN), noteholders of two tranches of bonds, HSBC and Standard Chartered Bank (SCB). The RCF and Keppel Corp are secured creditors; the noteholders, HSBC and SCB are unsecured (see chart 1).

The latest proposal to all the stakeholders, including secured and unsecured creditors and shareholders, is a debt-for-equity swap (see chart 2). The noteholders would recover 4-7% along with the other two unsecured bank creditors (see chart 3).

This is KrisEnegy’s second restructuring since 2016. Then, in order to get a lifeline from Keppel Corp, KrisEnergy proposed that Keppel Corp be allotted $140 million of secured ZCN. Meanwhile, DBS Bank took over the revolving facilities from HSBC, Commonwealth Bank and ANZ Bank, and upsized it. This resulted in two secured creditors.

For the unsecured noteholders, a $130 million tranche of notes which were set to mature in 2017, were extended to 2022, with coupon cut from 6.4% to 2% cash plus 2% accrued; the $200 million tranche of notes set to mature in 2018 were extended to 2023, with coupon cut from 5.75% to 2% cash and 2% accrued.

At the time KrisEnergy was in urgent need of liquidity following the oil price collapse in 2014. The company -which attempts to produce crude oil- owns three development projects and two producing projects. Based on company presentations, KrisEnergy’s share of average production 9,530 bbd in 1Q2020. Hence, the company got the restructuring plans through with votes from all its stakeholders.

The noteholders are clearly unhappy having to go through a second restructuring and swapping their debt for equity - which at present is worthless.

“The restructuring terms are disproportionately unfavourable to bondholders and favour the ZCN holders. They are senior to the bonds, and are secured. The unsecured bondholders rank lower than the ZCN holders and the bulk is owned by Keppel Corp,” says Woon Lai Har, a noteholder.

“Given that Keppel is also a large [equity] shareholder and now appears to be the largest secured creditor in KrisEnergy, we believe some terms in the RCF has some Keppel input. They worked together with DBS on the RCF and the whole restructuring is tailored to their interest. Since any borrowings to be paid off goes to Keppel, they have little interest in preserving the interests of the unsecured bondholders and we are not very pleased with the restructuring,” explains another noteholder. 

Securities Investors Association of Singapore or SIAS is holding an independent meeting with the unsecured bondholders on Thursday, July 16, at 7pm, to facilitate feedback and form an informal steering committee.