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Latest DBS loan to ailing Swiber captivates shareholders | Ticker
The DBS Group Holdings, Singapore's largest financial institution, granted two USD 146 million mortgages to Swiber Holdings, an offshore service provider, before the airline applied for bankruptcy, according to Reuters' legal writ. Lending, which accounts for 27% of DBS's involvement in Swiber, raises issues about how well DBS lenders have communicated with their customers and whether they have been sufficiently conscious of the risk involved.
Emphasizing the Swiber mess, the company said Friday that it was no longer considering dissolving itself but, with DBS assistance, would instead look to justice managers to restore monetary sanity under oversight. "We, as stockholders, were somewhat amazed at the extent of the involvement with a particular company in a vulnerable industry and the recent bridging loan with, as it turns out, similarly vulnerable guarantees," said Christopher Wong, senior asset manager at Aberdeen Asset Mangement Asia Ltd, which holds DBS stocks.
In June and July, the two borrowings were used to repay due borrowings, according to an sworn declaration by Swiber president and founding father Raymond Goh. DBS, which has a combined S$700 million (US$523 million) exposure to Swiber, was also the primary insurer of Swiber's business debts. When asked about the two mortgages, DBS stated in a declaration that it had provided funding in the shape of a bridging loan which would be reimbursed in the event of an anticipated capital contribution from an investor. bridging loan.
Their stocks fell 0.5% in trading later in the day and 7.2% since Swiber's early Thursday morning reports, versus a 4.2% drop in the index. Swiber's worries have caused much anger about the prospects for the Singapore banking industry and Singapore's banking system. "The Swiber event gives cause for concern that the currently low cost of borrowing that the three Singapore banks are incurring for their commitments in oils and gases will increase in the second half of 2016 and impact their profitability," said Simon Chen, senior researcher at Moody's Investors Service.
He added that more borrower may face liquidity shortages and turn to banking to restructure loans. Swiber's lawsuit also pointed to a late settlement by the British trust company, the AMTC, which had approved a $200 million transaction to purchase preferred stock from a Swiber affiliate. Swiber's Management Committee determined on 20 July that if the payout to EMTC had not been made by 26 July, it would request forced winding up.