Nam Cheong unable to pay interest on loan due to ‘severe’ cash flow constraints

SINGAPORE (THE BUSINESS TIMES) – Malaysian offshore support vessel builder Nam Cheong on Monday (June 29) said it needs to suspend the upcoming payment of its term loan's cash interest coming due on June 30.

The 2 per cent per annum interest is payable in cash for the half year ending June 30, which will be the fifth interest period for the term loan.

"This is primarily due to severe cash flow constraints faced by the group for the foreseeable future as a result of the declining vessel daily charter rates and utilisation as well as the realisable value of the group's vessels," Nam Cheong said, adding that these factors hindered the mainboard-listed company's ability to meet its debt obligations.

Moreover, there were "uncontrollable external factors" which also had a severe adverse impact on the company, Nam Cheong noted. For instance, the OSV sector has taken a hit from the oil price volatility since January this year as well as from Malaysia's extended movement control order in response to the Covid-19 pandemic.

Under the group's debt restructuring exercise completed in late-2018, Nam Cheong is required to service the 2 per cent cash interest as well as another 2 per cent in accrued interest by way of shares to be allotted and issued on the last day of each 12-month period.

On Monday, Nam Cheong did not disclose the size of the term loan or the amount of cash interest coming due on June 30, although creditors owed about US$319.8 million had opted for the seven-year term loan in January 2018.

The company said it "very much regrets" the suspension of the cash interest payment, "but perhaps the term loan creditors might empathise with its position".

Nam Cheong added that it is exploring a number of initiatives that will hopefully place it in a better financial and operational footing.

It intends to update the term loan creditors in the near future, "possibly before the end of August 2020", with some indication of its plans to ensure the company&#Read More – Source