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PIL seeks lifeline from Temasek Investment to stay afloat

SINGAPORE-BASED Pacific International Lines is in talks with an arm of the Lion City's sovereign-wealth fund Temasek Holdings over a potential investment aimed at keeping the debt-ridden container ship operator from shutting down

31 May 2020 - 19:00

SINGAPORE-BASED Pacific International Lines is in talks with an arm of the Lion City's sovereign-wealth fund Temasek Holdings over a potential investment aimed at keeping the debt-ridden container ship operator from shutting down.

In a statement, PIL said that Temasek's Heliconia Capital Management was lined up as a potential white knight in a restructuring package that would also involve a deal with its top 15 lenders to freeze loan payments and interest covering nearly 98 per cent of the carrier's debt until the end of the year. Other Temasek entities are among PIL's lenders.



'Despite the company's best efforts, the persistent Covid-19 pandemic has caused the situation to worsen over the past month,' PIL said in the statement.



PIL, the world's 10th biggest container line by capacity, according to data group Alphaliner, has been foundering financially in recent years as it competes against bigger players in a shipping market marked by low freight rates and excess ocean going capacity.



PIL, which owns around 65 ships and leases another 45, is the latest ocean carrier to ask for state backing as the coronavirus pandemic upends trade flows. CMA CGM this month won French government guarantees for an emergency US$1.12 billion loan, and South Korea's HMM got $600 million in April from state entities that now own 74 per cent of the company, reports Wall Street Journal.



Container lines have cancelled about a quarter of their scheduled sailings over the past three months because of declining demand as a result of virus-driven lockdowns. Carriers are seeking to limit capacity to maintain freight rates under weaker shipping volumes.



Temasek, one of the world's biggest state investors, has largely stayed out of shipping investments since selling Singapore flag carrier Neptune Orient Lines to France's CMA CGM in 2015 for $2.4 billion.



PIL didn't say how much money it was seeking from Heliconia. But as of June last year, it owed a total of $1.89 billion in loans and bonds, and the carrier needs cash to pay ship lease payments that run into the tens of millions of dollars.



PIL's loss widened in 2018 to $203 million from $141 million in 2017, making it one of the worst performers in the container line sector.



In March the company sold several of its ships along with its Pacific Direct Line subsidiary and withdrew from trans-Pacific services. PIL has been telling ship lessors in Japan that they can pay less than 10 per cent of the money they owe, starting in June, and asking for leasing agreements at reduced rates, a person with knowledge of the matter said.



PIL's 41 per cent stake in Hong Kong-listed container manufacturer Singamas has been pledged to nonbank lenders as collateral for loans since 2018.



The company warned in the statement that a total of $60 million in bond payments mature in November and that it faces default without financial help.


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