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Having read the recent newspaper articles, it seems that apart from the 710mil disclosure, it seems that there is more that meets the eye. I am surprised, and perturbed that if one through reading the news is able to find gaps within Swiber' s stories, I shudder to think of what actually goes on within the company. I am quite concerned that the governmet, MAS and relevant authorities may not be doing enough for shareholders, bondholders, creditors and investors alike.
1) I refer to the business times article below.
Federal International (2000) has on 16 September 2016 announced its associate, PT Gunanusa has received a Letter of Intent to Award from PTTEP International Zawtika Development 1C Project for USD $155mil. Swiber has on 7 June 2016 announced that it has ' secured 3 new contracts for projects' with a total value of USD $215mil. I find it abmysal to believe that PTTEP would award a full contract to Swiber in June 2016 whereas a Letter of Intent to Award to Federal some time later in September. Under the Listing Manual, an announcement has to be factual and clear. The announcement should also be balanced and fair. If Swiber is of the view that the letter of intent will materialise to a full contract, or if the letter of intent is binding on PTTEP, they could make further statements to substantiate their views that the letter of intent is binding on PTTEP. In this regard, one would appreciate Mr Koh' s views that whereas he has only received a Letter of Intent to Award, he is confident that the project will proceed given that his project is tied to fields entering into production whereas the USD $710mil project (refer to Swiber& rsquo s announcement dated 15 December 2014 on the West Africa project) is conditional amongst others, on the results of an appraisal drilling programme which takes place during the exploration phrase of a field development programme. Such qualitative information has however not been revealed to investors. Worst, the 15 December 2014 announcement states that the project will & lsquo commence work on the first quarter of 2015& rsquo . Only in mid 2016 did Swiber reveal that they have not started work on the project, but incurred USD $2mil in costs instead. To any investor, the perogrative to make an investment lies with the investor. It is however important to provide the relevant accurate information that is balanced and fair for one to make an informed choice.
2) I next refer to Emas' s announcement dated 22 July 2016 on their tie-up with Laursen and Toubro for a project with Saudi Aramco. The announcement states that contract provides EPIC services for the development of the second phase of the Hasbah Offshore Gas Field. Importantly, it states that EMAS Chiyoda& rsquo s scope takes up close to 40% of the contract value of USD $1.6bn. Contrast with Swiber' s announcement dated 15 December 2014. There is certainty over the client that Emas has tied up with (Saudi Aramco being an oil giant), which provides an investor with the necessary assurance that the project will go on and specificity of the oil field.
It was only after the Business Times report that we understand the letter of intent was signed with Royalgate. How does Royalgate stand amongst the oil and gas companies. Which other companies have Royalgate worked with that has resulted in a successful venture? What is the track record of the company? The article states that Royalgate is based in Equatorial Guinea. Have any projects in Equatoral Guinea kicked off before. Were there any bid tenders for the & lsquo project& rsquo . Have the likes of Ezra in a similar industry bid for the project? Ironically, this seems to be Swiber& rsquo s first foray into West Africa, and they have chosen for themselves the most dangerous of territory in Equatorial New Guinea. As an investor, I would like to know the risks of exeuction of the project, and it is unlikely that Equatorial New Guinea is a country where I would like to place my bet on.
3) The order book relating to Swiber' s announcement dated 8 June 2016. Amongst the 3 projects mentioned, the Vietnam project accounts for USD $21 mil of the project (scope being only transport and installation).
The Total project in Qatar is expected to be small (scope being only pipeline replacement). This ties in well with the remaining order book of USD $155mil (EPCI scope being construction of two wellhead platforms, associated pipelines and tie-ins for a project off the coast of Myanmar for a major Southeast Asian oil and gas company) for the project with PTTEP. This seems to suggest that Swiber has included the poject order of USD $155mil into its order book, notwithstanding that the consortium won the contract and Swiber ought to have included only its scope of work into its outstanding order book. Such inaccurate announcement for the order book is false and intentional to mislead the market.
It cannot be the case that under the original ' contract' , or more accurately termed as ' letter of intent to award' , PT Gunanusa' s scope of work is insiginifcant. Otherwise, Swiber will not need to form a consortium with PTG to bid for the project and would have subcontracted the work to a subcontractor to take up the entire EPCI work. Just as with the USD $710mil West Africa project, this seems to be Swiber& rsquo s modus operandi in providing false and misleading disclosure with recklessness and intent to beef up its order books.
4) The June 8 announcement states that the US$100 million EPIC contract awarded to Swiber in February 2016 has been re-tendered by the customer. This is & lsquo due to changes in the project work scope and schedule. The announcement is puzzling. The announcement dated 26 Feb 2016 states that a) the project is for a National Oil Company in South Asia (believed to be ONGC), and b) the project commences immediately and is expected to be completed in the first half of 2017. If a National Oil Company has already issued an award for a contractor to commence work immediately, how then does the NOC re-tender the project. The question then is, has Swiber obtained & lsquo an award& rsquo from the NOC, or at the very least an & lsquo LOI& rsquo from the NOC. If an LOI, were there any caveats in the LOI to allow for a re-tender. If there are caveats to allow for a re-tender, why was this not announced or clarified. If indeed Swiber has obtained an award from the NOC, I will be surprised if Swiber did not appeal and/or injunct to the relevant court authorities against the decision by an NOC to re-tender the project.
5) I next refer to Vallianz' s announcement dated 7 September 2016. If Swiber had entered into a charge over securities agreement on 5 July with DBS, shouldn' t this be announceable? How does a listed company liquidate such significant shares, 25% of another listed company without disclosure to the public? Had I known that 1) Swiber plans to liquidate the Vallianz shares as at 5 July 2016, there would be suspicion arising over Swiber' s cashflow status 2) if DBS has a charge over the securities, it will indicate that even DBS has problems with Swiber. The decision to liquidate Swiber shares lies with me, but I did not have the necessary and requisite information to do so. Instead, the biggest shareholder Pang, is able to coincidentally liquidate Swiber shares just before the collapse. I would like to enquire how much shares did Swiber directors have at the point of collapse, as compared to earlier. I have a suspicion they knew it was all coming and had already pared their losses, ' within the legal limit' . As shareholders, we just want transparency, and the truth. How could this Mr Oon who is a lawyer and director on the board fail to advise on this. What was he doing, and ' what was his law firm doing business with Swiber and yet failing to advise' .
6) From the limited information provided and from what has been seen, this seems to be only the tip of the iceberg. One thing is clear, the directors cannot be trusted. Swiber& rsquo s announcement dated 8 June 2016 provides overwhelmingly positive news to investors. Swiber states that it is actively bidding for USD $3.4bn of projects. We now know that it is a fluff. Only a month later, Swiber collapsed in epic dramatic Hollywood style.
7) This leads one to wonder on a) apart from the USD $710mil project award, other disclosures for which public information is not available to shed further light on the quality and accuracy of the disclosures b) the potential fraudulent transactions within the company - USD $231million of claims by vendors and creditors. From what is gleaned from Swiber& rsquo s 2015 annual report (if only the report is true in the first place), Swiber has USD $247mil of trade payable, 3 notes to redeem and only USD $90 mil of cashflow. It cannot be the case that the company was trading solvent until the fateful date of the filing of the liquidation. Letters of demand, or broadly speaking demand for payment would have been flooding in all the time and much earlier than before the probes by SGX, which explains the Greene Energy and Lipkin suits filed by creditors earlier. http://www.businesstimes.com.sg/companies-markets/sgx-goes-after-swiber-in-potential-rule-breach-amended
8) This leads to the next question. What were the independent directors doing over in Swiber. Were they really independent, irrelevant?
The independent director, Oon Thian Seng who has founded his own firm failed to verify on the facts and accuracy of the announcements, failed to advise on the disclosures and dealings of the company, but has not failed to fill in his own pocket with legal work from Swiber, notwithstanding the ' directors fees paid on behalf of shareholders, to act on the behalf of the shareholders to be independent and uphold transparent' . I would like to know how much Mr Oon Thian Seng' s law firm pocketed from Swiber in 2015 and 2016. That way, one would be able to tell of his ' independence& rsquo .
9) Based on Swiber& rsquo s 2015 annual report, the report states that there are USD $2bn of assets and USD $1.4bn of liabilities. Swiber had trade receivables of USD $442mil and other receivables of USD $210mil. The EGM was held only on 15 April 2016. At the time of the filing for liquidation, which is only 3 months after Swiber& rsquo s EGM, the Straits Times stated that ' Swiber said then that it had US$85.1 million in total assets and US$624.2 million in total liabilities, leaving it with net liabilities of US$539 million.& rsquo
What caused the drastic change within 3 months? How did Swiber value their books without impairment or write-down in their 2015 Annual Report. How did the auditors sign off on the books.
Further, for the JM to succeed, it is necessary to understand if sufficient cashflow can be generated, and if the projects are viable or profitable.
The JMs should update on the breach of agreement by AMTC and whether any action has been brought against AMTC, if not, why.
We understand that the mexico entity is clawing back the monies from the IM. Is there any status or update as to the clarity of doing so, as for the JM there cannot be further clawback of monies. Is the mexico entity entitled to clawback the monies under the ' agreement' . For JM to be given time to succeed, the JM has to exercise transparency.
Swiber has made demands against Vallianz for receivables owing. What is the status and update of such demands. Vallianz& rsquo s response is that the netting-off is an established course of dealing. Under the accounting standards, is such netting-off allowed. Both entities are listed in the Singapore Exchange. One in mainboard, the other in Catalist. Whether there is sufficient corporate governance in place to allow 2 separate entities to net-off payment and extend credit to each other, and whether a conflict of interest has arisen between the common directors of the 2 entities. The JM is presently managing the accounts, and needs to be accountable to the shareholders, bondholders, creditors, and the Court in managing the accounts, and to review past transactions.
13) The major projects that Swiber won. What were the bid prices put up by their competitors and the differences? Did Swiber win the USD $710mil project off a tender. Or have the directors in Swiber ' bought into the project' ?
14) We are talking about the collapse of a USD $2bn company overnight, when over in June they were making all the announcements on project wins, not profit warnings, not impairment, not write-down, not loss of contracts, not concerns on whether the company remains solvent or is a going-concern. In early July upon probe by SGX they were making defensive statements, providing all sorts of airy fairy reasons and explanation, simply short of telling the truth. Days before the collapse, the largest shareholder, Pang liquidated his shares within the ' legal limit' , 1% of the shares whereas shareholders who stuck by without the relevant qualitative information to make a decision are now faced with recovery of 2 cents to a dollar. If such disposal of shares are within the ' legal limit' , the question to ask then is what information did Pang have that the other shareholders do not have at the material time to dispose of his shares within the ' legal limit' .
15) What were the relative shareholdings of Swiber directors as at the time of liqudation, as opposed to their shareholdings a few years back. Was there a gradual disposal of the shares prior to liquidation.
16) An update on the SGX probe.
17) All in all, this seems a ponzi scheme. The scheme dependent on winning projects at all costs to replace the shortfall covered and then to win bigger projects to cover more shortfall. From the new projects, Swiber will rely on bank borrowings for drawdown on new projects to cover losses from old projects. I hope more is done to investigate and protect investor' s rights and take action for and on behalf of shareholders, bondholders and creditors.
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