Singapore’s PIL Seeks Temasek Investment for Survival

Pacific International Lines is in talks with an arm of Singapore sovereign-wealth fund Temasek Holdings over a potential investment aimed at keeping the debt-ridden container ship operator from shutting down.

Singapore-based PIL said in a statement Tuesday that Temasek’s Heliconia Capital Management was lined up as a potential white knight in a restructuring package that would also involve a deal with its top 15 lenders to freeze loan payments and interest covering nearly 98% of the carrier’s debt until the end of the year. Other Temasek entities are among PIL’s lenders.

PIL, the world’s 10th biggest container line by capacity, according to data group Alphaliner, has been foundering financially in recent years as it competes against bigger players in a shipping market marked by low freight rates and excess oceangoing capacity.

“Despite the company’s best efforts, the persistent Covid-19 pandemic has caused the situation to worsen over the past month,” PIL said in a statement on Tuesday.

PIL, which owns around 65 ships and leases another 45, is the latest ocean carrier to ask for state backing as the coronavirus pandemic upends trade flows. CMA CGM SA this month won French government guarantees for an emergency $1.12 billion loan, and South Korea’s HMM got $600 million in April from state entities that now own 74% of the company.

Container lines have canceled about a quarter of their scheduled sailings over the past three months because of declining demand as a result of virus-driven lockdowns. Carriers are seeking to limit capacity to maintain freight rates under weaker shipping volumes.

Temasek, one of the world’s biggest state investors, has largely stayed out of shipping investments since selling Singapore flag carrier Neptune Orient Lines to France’s CMA CGM SA in 2015 for $2.4 billion.

PIL didn’t say how much money it was seeking from Heliconia.

As of June last year, it owed a total of $1.89 billion in loans and bonds, and the carrier needs cash to pay ship lease payments that run into the tens of millions of dollars.

PIL’s loss widened in 2018 to $203 million from $141 million in 2017, making it one of the worst performers in the container line sector. It recorded a $35 million loss in the first half of 2019.

In March the company sold several of its ships along with its Pacific Direct Line subsidiary and withdrew from trans-Pacific services.

PIL has been telling ship lessors in Japan that they can pay less than 10% of the money they owe, starting in June, and asking for leasing agreements at reduced rates, a person with knowledge of the matter said.

PIL’s 41% stake in Hong Kong-listed container manufacturer Singamas has been pledged to nonbank lenders as collateral for loans since 2018.

The company warned in the statement that a total of $60 million in bond payments mature in November and that it faces default without financial help.

Singapore DBS Bank is one of PIL’s biggest lenders, with a $260 million exposure, and Bangkok Bank in Thailand is owed $220 million. Temasek-linked entities are owed around $140 million.
Source: Wall Street Journal

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