Pacific International Lines (PIL) said it is "not commercially feasible" to make payment on $60m in notes that were due on Monday.
The Singapore containership operator revealed the decision to not pay the debt securities, which carry a 8.5% interest rate, in a Singapore Exchange filing.
The move comes following a recent application by financially-troubled PIL in the Singapore High Court seeking a meeting with its creditors to consider a proposed scheme of arrangement. The company also sought a moratorium on legal proceedings against the company.
On 11 November, PIL held an informal meeting with the noteholders of the $60m debt where it outlined its financial restructuring plans.
The company told creditors that it had formulated a comprehensive restructuring plan with its lenders and Heliconia Capital Management, an arm of the Singapore state-backed investment company Temasek Holdings.
PIL told the noteholders that the company is fundamentally strong and that, if an agreement can be reached, it will have a future.
“With the support of the investor as well as a significant majority of creditors, PIL is progressing towards the comprehensive debt restructuring plan outlined in our disclosures last week,” PIL said.
“The plan will ensure long-term operational sustainability for the company and has been communicated in detail to noteholders during an informal meeting held on 11 November 2020. As per the aforementioned disclosures, this plan does include a reprofiling of all the company's debts, including noteholders.”
PIL also said the restructuring plan agreement with Heliconia and lenders came after many months of negotiation.
“The filing on 10 November to commence the scheme of arrangement process is a positive and significant milestone for PIL. It is a step that could only have been taken once we were sufficiently confident that the approval thresholds will be reached,” the company said.
PIL said the scheme of arrangement is a natural progression and serves to consummate the support the company has already received from a significant majority of creditors.
The scheme process will also provide all its creditors, noteholders, banks and other interested parties the assurance that their interests will be treated in a fair and transparent way. It will also allow PIL to continue to operate without any disruption to its business.
PIL said: “Finally, it also paves the way for the new investor (Heliconia Capital) to inject fresh funds into the company. Taken together, the outcome will be lasting stability for PIL.”
PIL’s liquidity troubles came from the overcapacity in the boxship market and high fuel costs in 2018 and 2019. But the outbreak of the Covid-19 pandemic hit global trade hard and resulted in liner companies cancelling sailings to reduce losses.
