Malaysian banks say they remain supportive of O&G sector

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KUALA LUMPUR (Dec 12): The Association of Banks in Malaysia (ABM) said today that all 27 of its member banks have been and will remain supportive of the oil and gas (O&G) sector.

In response to an article on the sector published by The Edge weekly, ABM said in a statement that all O&G financing applications have been given due consideration by the banks, as like applications from other industries, after a standard assessment procedure.

The assessment to determine eligibility and viability includes feasibility studies such as stress test analyses, due diligence and credit evaluation.

The Edge, in its report for the week of Dec 11-17 that cited key personnels at O&G players like Deleum Bhd and Uzma Bhd, wrote that banks have been more cautious in their lending to the O&G sector in recent years. 

Malaysia-based oil and gas (O&G) outfit De Raj Group AG, which just got the requisite approvals for a listing on the Frankfurt Stock Exchange in Germany, also told the weekly magazine that local bankers have told them they wouldn't touch O&G companies with a barge pole, hence the company's decision to turn to Europe.

Back to ABM's statement, the association said common reasons for loan rejection, beyond ineligibility, include incomplete loan documentation and inadequate supplementary information required to support banks’ assessment of cash flows and financial buffers for companies.

As at the third quarter of 2017, delinquent loans ratio for the O&G sector stood at 0.1%, while impaired loans ratio rose to 5%, due mainly to cash flow issues observed in service providers in certain upstream segments, ABM said.

As such, risks are limited to the banking system as exposures to the O&G sector accounted for about 6.5% of total exposures, ABM added.

It further assured that the banking industry, together with Bank Negara Malaysia, have been engaging with the Malaysian Petroleum Resources Corp (MPRC) to better understand developments in the O&G sector, and to disseminate information on avenues for assistance available for financially-distressed companies.

Viable corporate borrowers with multiple financial creditors can approach the Corporate Debt Restructuring Committee (CDRC) to work out feasible and market-driven debt resolutions through mediation, ABM added.

As for viable, financially-stressed SMEs, assistance can be sought from the Small Debt Resolution Scheme (SDRS). "Assistance offered include restructuring or rescheduling (R&R) of financing facilities and provision of financing (where appropriate) to stabilise business cashflow, whilst SMEs implement business turnaround plan," the statement said.