Thursday 28 Mar 2024
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SINGAPORE (June 2): Funding issues made headlines late last year and early this year, as the fall in oil prices caused global oil majors to slash their exploration and production budgets.

Sixty-six companies operating in the global oil and gas (O&G) sector defaulted last year, according to a Feb 15 report by Moody’s Investor Services, accounting for 46% of non-financial corporate defaults.

The metals and mining sector followed with 16 defaults, or 11% of the total. Last year’s global default tally was also the highest since 2009.
 
The ratings agency highlights that 144 of its rated corporate issuers defaulted last year, up 25% from 2015’s count of 116.

Borrowers defaulted on US$135 billion of debt, comprising US$92 billion in bonds and US$43 billion in loans.

These defaults may have made it more difficult — or less appealing — for companies to borrow money.

As the US Federal Reserve signals its intention to hike rates again this month and shrink its balance sheet in September, do shareholders need to be ready for cash calls?

With at least 92 SGX-listed companies have net gearing ratios of above 100%, now might be a good time for investors to start thinking about corporate indebtedness again.

“We believe Singapore is in the early stages of a downturn in the credit cycle, compared with other banking systems in Asean, and things are likely to get worse in 2017 and 2018,” says Bertrand Jabouley, director of corporate ratings at S&P Global Ratings.

“Significantly growing non-performing loans would potentially and eventually mean banks need to raise capital to protect their capital base, and would likely become more cautious in lending,” he adds.

Which SGX-listed companies are likely to tap their shareholders for cash?

Find out in our cover story, “Corporate Indebtedness”, on pages 10-11 of The Edge Singapore (week of June 5), available at newsstands now!

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