Pacific International Lines looking for $ 600 million cash to stay afloat

Singapore carrier Pacific International Lines warned on Wednesday it faces the very real threat of collapse unless creditors approve a comprehensive restructuring plan early next year.

“In absence of a comprehensive restructuring, PIL will likely face liquidation,” the company said in a presentation produced for an informal noteholders meeting in Singapore.

The proposed restructuring includes $600 million in cash and equity by Heliconia Capital Management, a debt repayment plan for secured creditors, and a securities-for-debt proposal for unsecured creditors, the presentation said. Previous estimates have put Heliconia’s investment at $400 to $450 million; Heliconia is a subsidiary of Singapore government investment arm Temasek Holdings.

PIL looking for court approval for restructuration plans

If creditors reject the restructuring and PIL is liquidated, it could be the biggest container line failure since the collapse of South Korea’s Hanjin Shipping in 2016, although its impact is likely to be significantly less. Hanjin was a global carrier when it failed, while PIL has sold ships and shrunk its network this year to focus on intra-Asia, Africa, and Middle East services to cut costs and slash losses.

PIL applied to Singapore’s high court on Tuesday to hold a creditors meeting to approve the restructuring plan. The meeting is scheduled to be held in January, with a court hearing to sanction the scheme expected in February.

PIL suffered $ 795 million losses in 2019

Speaking at the noteholders meeting, Teo Siong Seng, PIL executive chairman, said negotiations with Heliconia and PIL’s lenders have been completed and the company intends to implement the restructuring via a scheme of arrangement.

He added the final restructuring package includes the substantial investment from Heliconia “which is to be undertaken in conjunction with the restructuring of PIL’s existing debt obligations in order to recalibrate PIL’s capital structure to a more sustainable level.”

“The global economy and market volatility continued to deteriorate amidst a COVID-19 induced recession,” Teo said of the pressure faced by PIL. “As such, PIL is facing tremendous strain on its liquidity, which threatens its ability to operate as a going concern.” The company saw a $795 million net loss last year.

PIL has cut 25 vessels totalling 91.000 TEU capacity in one year’s time

PIL’s presentation added, “Additionally, PIL’s capital structure is over-levered and untenable, and requires a debt restructuring exercise in order to recalibrate its capital structure for long-term sustainability.”

No details of PIL’s current debt mountain have been revealed, but PIL owed $3.3 billion at the end of last year. That could have been cut following the sale of ships and various shipping line subsidiaries this year, including South Pacific specialist Pacific Direct Line.

PIL currently operates 95 ships with a total capacity of about 302,000 TEU, compared with 120 vessels of 393,500 TEU a year ago.

By comparison, Hanjin Shipping was ranked seventh in the world by Alphaliner with about 632,000 TEU of capacity ahead of its demise in 2016.