Can Swiber Holdings Limited Make Up Its Mind?

Last Thursday, Swiber Holdings Limited (SGX: BGK) shocked the market when it announced that it will be liquidating its business and that some of its key directors are leaving.

But in an interesting turn of events, Swiber announced last Friday that after holding discussions with its “major financial creditor,” it will be placed into judicial management instead of undergoing liquidation. Swiber has the support of its main financial creditor for this change.

The decision to switch from a liquidation to judicial management is a very significant move for both Swiber and its creditors. Judicial management basically allows the company to be placed under the supervision of Singapore’s courts while it tries to restore its financial health to a stronger state.

If Swiber had followed through with its previous decision to liquidate, the company will just sell its assets, settle whatever outstanding liabilities it has, and simply cease to exist after. But in the event of a liquidation, Swiber’s assets might be sold at fire-sale prices and creditors might need to take a huge write-down on their investments.

Going into judicial management means that the company has a chance to try to turnaround its business and its creditors can delay writing down their investments in the hopes that Swiber can turn itself around.

As I mentioned before, as of Swiber’s last reporting quarter (the three months ended 31 March 2016), it has US$1.07 billion (S$1.44 billion) worth of debt and bonds on its balance sheet. DBS Group Holdings Ltd (SGX: D05), Singapore’s largest bank, also recently revealed that it has about S$700 million worth of exposure to Swiber.

So now instead of waiting for Swiber to sell off its assets, the company’s creditors will have to wait and see if the company will be able to turn its business around while under judicial management. The show will go on.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim doesn't own shares in any companies mentioned.