Swiber Holdings

[weijian]

DBS's statement on its exposure to Swiber's winding up.

http://infopub.sgx.com/Apps?A=COW_CorpAn...60701e087c

SGD700million in loans, notes and off-balance sheet item.  Expect to recover half.

Will someone be able to share how does the 'surplus general allowances' work? Is it like a kitty (over-recognized losses) where one can dip their fingers in for some chocolate when the stomach is hungry?

DBS has a total exposure of about SGD 700 million to the Swiber group of companies....DBS expects to recover half of it and will provide fully for the anticipated shortfall. DBS will tap on its surplus general allowances and the net allowance charge will be lower, at about SGD 150 million.

[CityFarmer]

DBS's statement on its exposure to Swiber's winding up.

http://infopub.sgx.com/Apps?A=COW_CorpAn...60701e087c

SGD700million in loans, notes and off-balance sheet item.  Expect to recover half.

Will someone be able to share how does the 'surplus general allowances' work? Is it like a kitty (over-recognized losses) where one can dip their fingers in for some chocolate when the stomach is hungry?

DBS has a total exposure of about SGD 700 million to the Swiber group of companies....DBS expects to recover half of it and will provide fully for the anticipated shortfall. DBS will tap on its surplus general allowances and the net allowance charge will be lower, at about SGD 150 million.

Allowance is made for NPL with straight definitions. There is a general allowance " to cushion any potential asset-quality deterioration that may arise if the global economy hits a rough patch". DBS general allowance is >S$600m, based on my last figure.

(share what I know)

[dydx]

DBS's statement on its exposure to Swiber's winding up.

http://infopub.sgx.com/Apps?A=COW_CorpAn...60701e087c

SGD700million in loans, notes and off-balance sheet item.  Expect to recover half.

To have a total exposure of SGD700 million to an animal like Swiber, it is clearly reckless! To have sponsored a massive failed credit risk like Swiber to the SGD bond/notes market, I  think DBS has crossed the line into imprudence and irresponsibility towards local investors. Sad, DBS's top management better starts doing some serious soul-searching!

[newborn1000]

I guess unemployment rate will tick up for 3Q...........it is not a small company and the supporting industries will take some damage

[money]

DBS's statement on its exposure to Swiber's winding up.

http://infopub.sgx.com/Apps?A=COW_CorpAn...60701e087c

SGD700million in loans, notes and off-balance sheet item.  Expect to recover half.

Will someone be able to share how does the 'surplus general allowances' work? Is it like a kitty (over-recognized losses) where one can dip their fingers in for some chocolate when the stomach is hungry?

DBS has a total exposure of about SGD 700 million to the Swiber group of companies....DBS expects to recover half of it and will provide fully for the anticipated shortfall. DBS will tap on its surplus general allowances and the net allowance charge will be lower, at about SGD 150 million.

Allowance is made for NPL with straight definitions. There is a general allowance " to cushion any potential asset-quality deterioration that may arise if the global economy hits a rough patch". DBS general allowance is >S$600m, based on my last figure.

(share what I know)

DBS will make general allowances to anticipate for loans that will turn sour.  It is like a prediction, so in this case, DBS will partially use some of its general allowances to account for swiber. And if i read it correctly, it will still take a further charge of 150m. 

Actually i think  DBS  has cumulative general allowance of around 3 billion if i remember correctly

[wind22i]

Swiber is just the first oil and gas co to go down..
There could be few more coming..

[CY09]

Swiber is just the first oil and gas co to go down..
There could be few more coming..

Swiber isn't the first, it is currently the third listed coy -- Linc Energy and Technics beat it to it.

With the current doom and gloom, it is inevitable more domino will fall here. However, EDB/MTI is very aware of the contagion effect and the number of jobs which is reliant on our offshore&marine industry.

I am prepared to say, policyholders will push banks and economic policy units to ring fence this contagion. A few more O&G companies may fall, but after which they will try to prevent more defaults. 

To D.O.G: Thank you for breaking down the guess estimate value of each component, but it seems DBS is taking loss provision despite the analysis of a near certainty of getting its loans back, could it be because DBS is backing the notes in some way - similar to Ezion notes? This creates off balance sheet liabilities for DBS

[specuvestor]

Looks like we dont even need to wait till 3Q results cause the exposure is significantly larger than i thought

I don't think banks are in the business of taking back their principal. There are in the business of making the principal work. If it is possible for the borrower to continue the business they would do it. And they are not unaware of 2nd or even 3rd degree collateral damage... the credit quality and anxiety of whole sector now will be heightened.

Banks pull the plug only when they know it cannot be saved, or there is a run. Ditto when ML first pull on Bear Sterns. I'm skeptical that say DBS won't have a loss for Swiber which we will know in 3Q results.

It is not legally bankrupt yet , the most banks will set provisions for the doubtful debts , it will be written off after judgement is out . But for the case of Swiber , is it as good as gone case , especially for shareholders .

It didn't declare bankrupt but it's liquidated. There's no difference cause the creditors dont have to pursue the bankruptcy route to recover. They are the same thing...

Hmm reminds me of the other thread regarding missing payment is not default

[TTTI]

Swiber is just the first oil and gas co to go down..
There could be few more coming..

Swiber isn't the first, it is currently the third listed coy -- Linc Energy and Technics beat it to it.

With the current doom and gloom, it is inevitable more domino will fall here. However, EDB/MTI is very aware of the contagion effect and the number of jobs which is reliant on our offshore&marine industry.

I am prepared to say, policyholders will push banks and economic policy units to ring fence this contagion. A few more O&G companies may fall, but after which they will try to prevent more defaults. 

To D.O.G: Thank you for breaking down the guess estimate value of each component, but it seems DBS is taking loss provision despite the analysis of a near certainty of getting its loans back, could it be because DBS is backing the notes in some way - similar to Ezion notes? This creates off balance sheet liabilities for DBS

It's because these loans are not 100% secured.
The banks value the secured assets periodically, but allow for loans up to a certain % above the value that's used to secure the loan.
So it follows that despite liquidating, they will still have to suffer some losses. In this particular case, about 50%.

This liquidation had signs of it coming, it's not sudden. Hence, the bank would've marked down the value of the assets, and probably already had asked Swiber to put up more collateral/pay down the loan. If Swiber couldn't, DBS would've then be prepared to suffer some sort of a haircut, so I don't think it's a surprise to DBS. That's how they project the potential losses and set aside capital accordingly for general provisions.

In this particular case, DBS has indicated that they have an exposure of 700mil, of which the secured assets are worth 350mil.
Of the remaining 350mil that they're going to record as losses aka writeoff, about 200mil has already been provided for under "general provisions". That's like a rainy day accounting fund. The remaining 150mil will be a new allowance charge which is currently not accounted for anywhere on the BS.

[TTTI]

Swiber is just the first oil and gas co to go down..
There could be few more coming..

Swiber isn't the first, it is currently the third listed coy -- Linc Energy and Technics beat it to it.

With the current doom and gloom, it is inevitable more domino will fall here. However, EDB/MTI is very aware of the contagion effect and the number of jobs which is reliant on our offshore&marine industry.

I am prepared to say, policyholders will push banks and economic policy units to ring fence this contagion. A few more O&G companies may fall, but after which they will try to prevent more defaults. 

To D.O.G: Thank you for breaking down the guess estimate value of each component, but it seems DBS is taking loss provision despite the analysis of a near certainty of getting its loans back, could it be because DBS is backing the notes in some way - similar to Ezion notes? This creates off balance sheet liabilities for DBS

It's because these loans are not 100% secured.
The banks value the secured assets periodically, but allow for loans up to a certain % above the value that's used to secure the loan.
So it follows that despite liquidating, they will still have to suffer some losses. In this particular case, about 50%.

This liquidation had signs of it coming, it's not sudden. Hence, the bank would've marked down the value of the assets, and probably already had asked Swiber to put up more collateral/pay down the loan. If Swiber couldn't, DBS would've then be prepared to suffer some sort of a haircut, so I don't think it's a surprise to DBS. That's how they project the potential losses and set aside capital accordingly for general provisions.

In this particular case, DBS has indicated that they have an exposure of 700mil, of which the secured assets are worth 350mil.
Of the remaining 350mil that they're going to record as losses aka writeoff, about 200mil has already been provided for under "general provisions". That's like a rainy day accounting fund. The remaining 150mil will be a new allowance charge which is currently not accounted for anywhere on the BS.

 
On a more macro note, I don't think Sg gov will attempt to "ring fence" if it becomes a contagion.
Thus far, SG gov's policies have never been to try to fight against economic forces. They don't waste precious capital to prop up failing industries, no matter how badly it impacts the job market.
Instead, I think Sg gov will have more supportive kind of policies such as providing funds for retrenched workers to go for training, providing rebates of all sorts to the more affected lower income, even providing financial help for retrenched workers, helping with the job search or job placement etc, rather than throwing money to support companies in a bid to ring fence contagion.