PIL poised for restructuring after creditors endorse scheme

Pacific International Lines (PIL) is set to escape liquidation after the majority of its lenders and creditors voted on 1 February to endorse the company’s proposed debt restructuring plan.

At least half of all classes of the beleaguered PIL’s secured and unsecured creditors who turned up at the meeting at the Singaporean liner operator’s headquarters on 1 February assented to the company’s proposal.

The unsecured creditors include holders of PIL’s SG$60 million (US$45 million) bonds that were redeemable on 16 November 2020, but the liner operator has defaulted on both the principal and interest amounts.

The debt restructuring, which PIL referred to as a scheme of arrangement, entails converting the bonds to perpetual securities, but cash payments will be accrued for at least five years before being released to the bond holders.

Following today’s vote, PIL will apply to the High Court of Singapore to sanction the scheme. The court will rule on the scheme later this month or in March.

The debt restructuring exercise is expected to be completed by the first half of 2021. With Heliconia taking a stake in PIL, the company’s founding Teo family is expected to cede control.

PIL’s managing director, Teo Siong Seng said, “The comprehensive financing package offered by our investor, in conjunction with a holistic restructuring of PIL’s financial liabilities, will recalibrate PIL’s capital structure for long-term sustainability, thereby allowing PIL to emerge as a stronger, leaner and better capitalised company, and one that will provide creditors with a clear path to recovery going forward.”

After two loss-making years, PIL had total liabilities of US$3.59 billion in June 2020, including US$1.12 billion of bank loans that are due within a year.

The company has offloaded assets throughout 2020, including its subsidiary Pacific Direct Line, while it also ended its operations on the Pacific trades in early 2020. Seventeen of PIL’s ships, including two bulk carriers, were sold in 2020, according to VesselsValue.

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