Malaysian banks say they remain supportive of oil and gas players

This article first appeared in The Edge Financial Daily, on December 13, 2017.
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KUALA LUMPUR: The Association of Banks in Malaysia (ABM) said yesterday 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 by The Edge Malaysia on the sector, ABM said in a statement that all O&G financing applications have been given due consideration by the banks, just like applications from other industries, after a standard assessment.

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 Dec 11 to Dec 17 issue that cited key personnels at O&G players such as Deleum Bhd and Uzma Bhd, wrote that banks have been more cautious in their lendings to the O&G sector in recent years.

Malaysia-based O&G outfit De Raj Group AG, having just received the requisite approvals for a listing on the Frankfurt Stock Exchange in Germany, also told the weekly that local bankers have said to them that they wouldn’t touch O&G companies with a barge pole, hence the company’s decision to turn to Europe.

On ABM’s statement, the association said common reasons for rejecting loans, apart from ineligibility, include incomplete loan documentation and inadequate supplementary information required to support banks’ assessment of cash flows and financial buffers of companies.

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

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

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

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

As for viable, financially-stressed small and medium enterprises (SMEs), assistance can be sought from the Small Debt Resolution Scheme. “The assistance offered includes the restructuring or rescheduling of financing facilities and provision of financing [where appropriate] to stabilise business cash flow, while SMEs implement their business turnaround plans,” it added.