Pacific International Lines’ (PIL) management said that despite the recent hike in container freight rates, the Singaporean carrier remains overleveraged and needs further restructuring to survive.
[s2If is_user_logged_in()]During a meeting, on 15 January 2021, PIL’s management urged bond holders to vote for PIL’s proposed restructuring, due 1 February, in return for having bonds converted to perpetual securities. At least 75% of the bond holders must consent on the day for the restructuring to proceed. Perpetual securities are redeemable on a date decided by PIL, with accrued and cumulated cash distributions.
PIL’s management told bond holders that Heliconia’s current loans are insufficient for the company to escape liquidation. “Even with a sizeable capital injection of US$600 million from the investor, PIL’s financial position remains untenable. PIL’s substantial debt burden continues to be too large for the company to sustain – PIL therefore needs to undergo a holistic restructuring to recalibrate its capital structure for long-term sustainability.”
If bond holders agree to convert bonds to perpetual securities, they will have two options, or a mixture of both options that will involve non-cash distributions for the first five to six years. Thereafter, cash distributions will be offered.
Non-cash distributions will bear interest as if it constituted part of the principal amount of the perpetual securities, which will be of the same value as the original bonds. An independent third-party advisor estimates that the bond holders can recover 2% on outstanding amounts in the restructuring.
PIL’s said it is optimistic of the company’s survival should the restructuring proceed, especially with Heliconia becoming a shareholder. Any debt repayments made to secured lenders are variable and to be paid only if PIL has sufficient cash, as it is subject to a debt service waterfall.
If the restructuring proceeds, Heliconia will offer a US$200 million revolving credit facility that PIL can drawdown. Amounts drawn down under this facility will need to be replenished in the following years by the company.
PIL’s management said the company is still reprofiling its liabilities, explaining that debt levels remain untenable and would impede normal operations. The company sought protection from creditors at Singapore’s High Court and, as of 30 June 2020, PIL’s liabilities totalled US$3.59 billion, including US$1.12 billion of bank loans due within a year.
Heliconia Capital, a unit of the Singapore government’s investment company Temasek Holdings, granted PIL a US$112 million emergency facility in July 2020, repayable in March. Heliconia has agreed to a second financing tranche, amounting to US$600 million, comprising debt and equity investment.[/s2If]
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Martina Li
Asia Correspondent
