Pacific International Lines offered $600M lifeline as it fights to avoid liquidation

Pacific International Lines (PIL) is seeking protection from the Singapore High Court from winding-up or enforcement orders as it tries to get its noteholders on board with a comprehensive restructuring plan.

Under the plan, Singapore’s container shipping major is vying for fresh financing from Heliconia Capital Management Pte, an investment firm owned by Temasek Holdings, and a re-profiling of the company’s debts by way of a scheme of arrangement.

The filing with the court is being saught ahead of a meeting between PIL and some of its creditors on the proposed scheme of arrangement, including noteholders of the S$60 million fixed rate bonds due 2020 issued by the company.

The company started looking for investors having been faced with considerable financial strain due to the impact of the COVID-19 and market volatility including high bunker prices and oversupply of capacity.

The company has been on a cost-cutting mission for a while now, having announced several vessel sales and rationalizations of service offerings.

“PIL’s liquidity situation is extremely strained due to the unstable macroeconomic environment, sizeable vendor overdues, and its unsustainable capital structure,” the company said in a presentation filed on the Singapore stock exchange intended for an informal meeting with the noteholders.

” Substantial, escalating overdues to critical vendors have impeded PIL’s ability to operate normally, and PIL requires a significant capital injection to restore long-term stability with vendors.”

PIL launched talks with Heliconia in May 2020 and the duo managed to agree on what has been described as a substantial investment worth $600 million.

As disclosed, PIL has already completed the first stage of its comprehensive financing package having secured a $112 million emergency credit facility to fund overdue trade vendors and other critical cash requirements.

However, this has been described as an interim measure to boost liquidity while discussions on the broader financing solution were underway.

The second stage includes the $600 million financing from the investor that is intended to repay critical vendors, and recalibrate PIL’s capital structure to sustainable levels.

The financing package will comprise a mix of debt and equity investment, the company said in the shared material.

PIL said that the financing proceeds from the second stage would also be used to repay the emergency credit facility.

The financially struck containership owner believes it will not be able to secure a better proposal for the company and its stakeholders from any other investor.

“If we do not get the required number of votes in support of the Scheme, this restructuring will fail,” the company said.

“In absence of a comprehensive restructuring, PIL will likely face liquidation. In contrast, the current restructuring plan offers noteholders a significantly better recovery than liquidation.”

The scheme meeting is set to take place in January 2021 with a court hearing to sanction the scheme expected in February 2021.