Ezra Holdings bet on offshore oil at the top of the cycle — then the price crashed

Ezra Holdings was a Singapore-based offshore oil and gas services group, built around vessels and subsea work for the energy industry. It grew during the years of high oil prices, when offshore drilling was booming and the companies that supplied it could borrow and expand freely. Ezra built up its fleet and its subsea business, including the affiliate Emas Chiyoda Subsea.

The business was geared to a price that did not last. When oil crashed from 2014, offshore drilling was cut back sharply, and the market for offshore supply vessels was left with far more ships than there was work — an oversupply, made worse by a wave of newly built vessels, that drove charter rates down. Ezra's revenues fell just as its debts came due.

In March 2017 Ezra filed for Chapter 11 bankruptcy protection in the US Bankruptcy Court in New York, listing up to $500 million of liabilities, while its subsea affiliate Emas Chiyoda Subsea carried nearly $900 million of liabilities and loans of its own. The group also sought judicial management in Singapore. Unsecured lenders including DBS, OCBC and HSBC were left exposed.

Ezra is a case about buying capacity at the top of a commodity cycle. The vessels and the debt made sense while oil was high; when the price fell and the market was oversupplied, the same fleet became a liability with no revenue to service what it had cost, and a group that had looked prosperous a few years earlier was in bankruptcy.