Swissco Holdings Limited (“Swissco“) was officially placed in judicial management on 21 April 2017. Messrs Angela Ee and Purandar Rao of Ernst & Young – previously the interim judicial managers – have now been appointed as permanent Judicial Managers (“JMs“).

Generally, there are one or more of three (3) reasons why a company is placed in judicial management, namely that the judicial management is likely to result in:-

(1) the survival of the company, either in whole or in part;

(2) to facilitate a scheme of arrangement under Section 210 of the Companies Act (Cap. 50); and/or

(3) to achieve a more advantageous realisation of the company’s assets that would be obtained in a winding up, i.e. better returns to creditors.

See Section 227B(b) of the Companies Act (Cap. 50).

The Business Times reports that it is for the third of these reasons that the JMs have been appointed. 6 offers have apparently been made for the Swissco’s acquisition, although only one is in writing (which would obviously be subject to terms to be agreed).

Sale of Coral Knight (the “Vessel“)

The JMs will now have 60 days to put forward a statement of proposals to Swissco’s creditors. This is likely to include the finalisation of the sale of Swissco’s vessel, Coral Knight, to Australian Maritime Systems Asset Holdings Pty Ltd (“AMSA“) for USD 7.2 million. The vessel is presently under bareboat charter to AMSA until 29 April 2017.

With the sale of the vessel, the Company will be able to pay down all amounts owing to OCBC, which has a mortgage over the vessel. This sale is still pending approval from the Singapore Stock Exchange.

Swissco’s Offshore Vessel Support Business

Through its subsidiaries, Swissco has a fleet of 26 vessels – with the plan to realise the sale of these vessels, marketed by Norway’s Pareto Group. The process is being overseen by Swissco’s largest creditor, UOB Limited, which has an estimated exposure of approximately USD 100 million.

Likely Extension of the JMs Tenure

Judicial Managers are appointed for a 6-month period, but given the length of time it will take to facilitate the various vessel sales, as well as the realisation of Swissco’s other interests (e.g. its 50% interest in Strategic Offshore Limited, a rig-owning entity for a value of SGD 3.5 million), the judicial management order is likely to be extended in tranches of 6-months at a time (at the expiration of the present period).

Given that the JMs current tenure expires 20 October 2017, one can expect an application for an extension of the order to be made on or before that date.

Concluding Comments

Whilst it seems that OCBC’s position is relatively secure, the question remains as to whether, and to what extent, UOB – and Swissco’s other institutional lenders – will be repaid.

Let’s not forget Swissco’s general body of unsecured creditors, who will only be entitled to participate and receive a pari passu share of the surplus proceeds from the asset sales, if any.

Given that there is hardly any discussion about the unsecured creditors position, it is possible that there may be nothing left at the end of the day for this class of creditors. Moreover, the preferential creditors (such as employees) will have priority – as a class – ahead of the unsecured creditors.

Eventual Liquidation

Once the JMs have realised Swissco’s assets, obtained approval for their relevant proposals and courses of action, adjudicated on the various proofs of debt and made the necessary distributions (if any) – Swissco will then go to the corporate probate department.

Yes, compulsory liquidation, where the JMs will likely be appointed as the joint and several liquidators for the purposes of liquidating and dissolving the company. That’ll probably happen 1 to 2 years from now.

One brief, two appointments. EY for the win.

22 April 2017

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