Swiber Holdings

[cfa]

Who want to give them orders and supply them raw materials after their recent intention . More lshould going after their outstanding payments. Damage has been done !

[d.o.g.]

If I were the small creditors in this loan deal, I will not agree to it and will demand my principal back or face my letter of winding up. It will be easier for the big creditor to take the rap and only get his principal back after a long time.

Once JM occurs the applications for winding up have no effect. That is the whole point of JM, to stop a disorderly liquidation, in order to maximize the proceeds for the creditors as a group.

The order of repayment is determined by the JMs who will pay, in order: IRAS, employees and CPF, secured creditors, unsecured creditors. The size of the amount owed has no effect on the pecking order.

[whatamidoing]

[removed for privacy]

[donmihaihai]

With only about 500 mil of order book left (ex the african project), Swiber only has about a year of backlog to survive. And with the liquidation news dragging down its reputation, winning new orders is going to be hard. If things pan out as what I am typing, Judicial management will still turn to liquidation in a years time, unless Swiber decides to layoff 70% of its workforce within this time frame to meet the dwindling orderbooks or does major asset sale of its vessels


If I were the small creditors in this loan deal, I will not agree to it and will demand my principal back or face my letter of winding up. It will be easier for the big creditor to take the rap and only get his principal back after a long time.

What will you do when your contractor is in JM? I don't know about you but I will find backup and cut them off asap. Oh yes, contract signed. But that doesn't mean I won't try.


Going after client for payment after JM happened is imo, lousy management. Suppliers have the feel of their clients. Whether highly leverage or not.
Same goes for loans. Why lend to highly leverage company? Because return is good. But risk is higher, so spread the risk. The question is not about the amount of loan but how big is the portion of total loan portfolio of the bank.
Is there a concentration of loan in a specific section in DBS? IDK, I am not looking.

[specuvestor]

TSMC is a company without strong major shareholders but with a strong board and management team led by Morris Chang. In fact that's how the corporatization should work with the institution of Board and Management team. Similar to many US companies or MNCs.

End of day the 3 SSH of Swiber has vested interest in the company and there is incentive for them to keep the company going. But of course if the company needed funding and they can't or not willing to fork out more cash then the outcome is clear. On the other hand if their stake is small vs their net worth or NAV, then they may figure it is not worth their effort either.

The corollary for companies with strong shareholders is that the Board is not independent and the company will move to the beat of the SSH. That's where cronyism or deep value will occur cause the SSH control the Structure. Basically one has to assess whether you want to dance with the SSH. But if the SSH is a visionary or hardworking, things can move very fast.

So there's pros and cons in both scenarios and the unsatisfying answer is "it depends"

The "rule" seems based on human motivation system. We probably all know the story of "一个和尚挑水喝，两个和尚抬水喝，三个和尚没水喝". Sorry for not translating it, you can cut-and-paste to google for translation. To be sure, the orphan company means more SSHs with almost equal stakes. Least-effort solution, is often the team solution, even it is fatal over longer term.

No absolute rule in investing, IMO. To break the rule, you need to master it. If similar structure exists in core team of Alibaba, I have no reason to worry, with a highly passion, and aligned team. But most of the time, the rule applies if unsure, IMO

I should spend some time on TSMC, it seems is an interesting company. It is probably fall into similar situation of Alibaba 

(not vested)

Totally agree it is actually based on incentive system. People not only analyse risk/ reward but also effort / reward and sometimes even hubris. Buffett and Munger is totally right that it depends on the individual's incentive system but in aggregate the material incentive is paramount. So it's not about "orphan" or not, it's about understanding the incentive of the SSH.

If the stake of ⅔ of the SSH is small vs their net worth but it accounts for almost the entire net worth of the 3rd SSH, it is not difficult to imagine who is going to be the hardworking one. That's why it's not that ridiculous to understand why certain small companies have little SSH support

IMHO TSMC is a class of it's own like Apple. That doesn't mean they are invincible but will take a long time to erode their moat

[specuvestor]

It's actually a very fine line between utopian and ignoramus. I am not a politician so I can be politically incorrect. I only know cats that can catch mice are good cats. US talks about freedom and hype up all the racial issues and now everybody has to be politically correct in their speech, even media and movies. Singapore catch a racist and we make sure he pays for it. FULL STOP. Not splashed across the media in the name of freedom of information or speech to incite more hatred and ostracized the police who are trying to do their job and as far as I know, also have mothers.

Sorry for the Friday rant.

Not relevant to the thread so I will keep it to the minimum: I disagree.

Fruit for thought, between Singapore and the US:
1. Which country is overall more successful, socially (social progressiveness) and economically (produced more innovators, entrepreneurs and visionaries)?
2. Which country is known for nurturing highly-educated talents that, more often than not struggled to venture out of the box?

Stifling different opinions may sometimes be convenient, but also stifles exchange of good ideas and allow bad ideas to persist.

I don't disagree to a certain extent. So the question to ask is what made US great. And what changed since then that I think US will be going downhill from now (actually since 911 which I deemed to be Pax Americana)

Both US and Singapore are immigrant societies. What's the difference between us? What's the underlying philo and policies between a more socialist Singapore and a more individualistic US? Is GDP a better figure or GDP per capita is better figure?

What I do observe is that 依样画葫芦 Is not going to work in the longer term. Businesses can do a guerrilla strategy but nations have no such option.

[specuvestor]

JM is appointed to liquidate , but not to run the company .

Liquidators are appointed to liquidate the company. Judicial managers are appointed to temporarily run the company in order to pay employees, collect receivables, pay creditors etc. Generally the priority is to stabilize the company so that it does not simply "freeze" for lack of funds.

Yes but in general the accountants appointed to run the company are looking to avoid a fire sale, not run the business. Their value add to the actual business is approximately like a vulture fund. (Note I separate business from company) The track record of a company recovering from JM, though not zero, is dismal cause accountants are not businessman

OTOH chapter 11 focus on restructuring not liquidation. That's why it's a better model with in tact management and board (at least for time being, pending negotiation with creditors) the track record is much better though many eventually also go the liquidation route

[CityFarmer]

Totally agree it is actually based on incentive system. People not only analyse risk/ reward but also effort / reward and sometimes even hubris. Buffett and Munger is totally right that it depends on the individual's incentive system but in aggregate the material incentive is paramount. So it's not about "orphan" or not, it's about understanding the incentive of the SSH.

If the stake of ⅔ of the SSH is small vs their net worth but it accounts for almost the entire net worth of the 3rd SSH, it is not difficult to imagine who is going to be the hardworking one. That's why it's not that ridiculous to understand why certain small companies have little SSH support

IMHO TSMC is a class of it's own like Apple. That doesn't mean they are invincible but will take a long time to erode their moat

To add few points on the "orphan company rule".

Mr Yeo's preference on family businesses, should be noted, in understanding the rule. We should also considered his broadly diversify strategy i.e. time and resources are also diversified thinly into each stock.

[specuvestor]

Just saying that there are family owned business that pays fees and salary to SSH more than dividends, or through other direct or indirect connected businesses. So understanding the Structure and incentive is important than take "family business" as a "rule"... I don't think it's a usable "rule"

[gzbkel]

Hi CF and specuvestor, thanks for the very interesting discussion.
As a rule of the thumb, can we say that SSH with about 30~40% stake is ideal?

Stake is large enough so that the SSH is interested in the fate of the company, but not enough control to oppress the OPMI.