atans1

Unique Selling Point of Swiber junk bonds?

In Banks, Energy, Financial competency on 07/10/2016 at 3:31 pm

DBS’s private banking clients were told Swiber bonds were safe ’cause DBS was a big lender?

This wicked, evil tot crossed my mind when I was reminded that DBS

had a S$700 million ($522 million) exposure to the Swiber group of companies and expected to recover roughly half, given some was secured by assets. That amount represents 92 percent of Swiber’s $567 million in total equity at the end of the first quarter, the last time it reported its financial position. It also probably means that just over half of all the leases, borrowings and notes payable reported by Swiber were owed to DBS.

Any credit officer should balk at a lender being in charge of more than half the debt of an entire company. It gets worse, however, because on top of that, Swiber’s debt had already become much larger than its equity, a sign the bank should have considered scaling back its exposure.

https://www.bloomberg.com/gadfly/articles/2016-08-03/how-deep-into-oil-rigs-is-dbs

I mean DBS wouldn’t lend money to any dog, let alone a dying dog with maggots festering in it, would it? And persuade its private banking clients snd accredited investors to join in, would it?

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  1. Bloomberg commentary ain’t the quality of FT for sure. There is nothing wrong with debt exceeding equity – it is only a matter how many times debt exceed equity and even so whether the leverage is excessive or not depends on the operating dynamics, e.g. cashflow.

    But for DBS Private Banking to say that investing in Swiber bonds is safe because DBS is a big lender – well DBS Private Banking ought to be shot. Loans comes with covenants and covenants comes with lien on operating assets. Bond holders are unsecured, i.e. they are bare assed while DBS is not.

  2. Don’t be surprised if many of those sub prime bonds were used to pay off maturing dbs loans, hahaha. And dbs flogging those bonds onto clueless jokers. Hence money was moved from clueless to dodgy company and finally to bank to cover maturing sub prime loans, haha.

    • Actually there was one instance of DBS giving a bridging loan to Swiber to repay a bond issue or coupon. Briding loan became permanent.

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