Singapore’s financially troubled Pacific International Lines (PIL) has held an informal meeting with noteholders of $60m in debt due this year to outline its restructuring plans.

In a presentation, which has since been filed on the Singapore Exchange, it offered a detailed appraisal of its difficulties and explained how it plans to build a sustainable capital structure.

The company hopes to arrange a meeting of creditors to support the package of measures in January before seeking court approval for its financial restructuring in February.

PIL said it is fundamentally strong and that, if it could win the backing of stakeholders, it could continue in business as “the largest container shipping group in Southeast Asia.”

PIL, headed by chief executive SS Teo, said the restructuring offers the best option for stakeholders, which face “value destruction” if the company is allowed to fold.

At the meeting, PIL explained how it was hit by overcapacity in the boxship market and higher fuel costs in 2018 and 2019.

Revenue peaked at $4.4bn in 2018, then collapsed to $3.4bn last year. It reported net income of $85m in 2017 but a loss of $254m the following year and a $795m loss in 2019.

Losses in 2019 were mainly due to a one-off impairment of close to $600m as a result of a mark-to-market valuation of vessels as part of a rationalisation plan formulated at the end of that year.

PIL described its liquidity situation as “extremely strained” and said it faces “escalating overdues” to its vendors, affecting its ability to do business.

Under stage one of its financial restructuring, a $112m emergency credit facility has been arranged through investment company Heliconia Capital Management. The $112m, received in July, was used to fund overdue trade vendors and other critical operating cash requirements.

Working on stage two

PIL hopes it can maintain its position as a leading South East Asia container line with ships such as the 11,900-teu Kota Pekarang (built 2017). Photo: Wayne A Court/MarineTraffic

It is currently working on stage two of its restructuring, which involves a $600m comprehensive financing package from Helconia, which is part of the Singapore state-back Temasek financial group, made up of debt and equity.

Part of stage two funds will be used to pay off the emergency credit facility, pay back creditors and restructure PIL’s capital structure to continue in business.

Under PIL’s plans, unsecured lenders, including the noteholders, are to be offered over-the-counter tradable perpetual securities, known as perps, issued under two interest rate options.

Should the deal not be accepted, then, under a liquidation scenario, PIL estimated its noteholders will receive only $2 for every $100 of notes held.

It said the deal offered the best option for noteholders, which are to be sent full details of the proposal.

To push on with the scheme of arrangement, which will allow it to continue trading, PIL requires 75% of creditor support for the plan.

If the deal can be pushed through, PIL said it will emerge with a streamlined network and strong exposure to north-south and east-west non-mainline trades where it said there is growth potential. Other operating networks around China’s Belt and Road initiative and African trades offer further potential, it said.