KS Energy's US$230M default put it under judicial management

On September 1, 2020, the Singapore High Court granted OCBC Bank's application to place KS Energy and its 80.09-per-cent-owned unit KS Drilling under judicial management, appointing Deloitte's Andrew Grimmett and Lim Loo Koon as interim judicial managers after a heavily contested hearing. OCBC, holder of 61 per cent of the group's debt, had demanded repayment of a US$230.7 million term loan and US$5 million bridging loan, telling the court the companies were 'clearly cash-flow insolvent and balance-sheet insolvent'.

The bank cited 'alarming cash burn rates and losses', a fleet whose rigs were nearly all idle or under-utilised, and management concerns: former chairman and CEO Kris Wiluan was facing 112 charges of alleged market rigging and false trading, and resigned on August 13 to focus on his defence. OCBC said it had accommodated restructurings 'without knowledge that Mr Wiluan may have been trying to artificially prop up' the share price; Wiluan called that 'disingenuous'. KS Drilling had also cut its CFO and COO rather than streamline family management, leaving it to Wiluan's son and son-in-law.

After a one-year moratorium agreed on August 2, 2019, no payments had been made by July 31, 2020. KS Energy's total liabilities of US$381.2 million for FY2019 far exceeded its total assets of US$309.6 million, and OCBC warned Covid-19's impact on oil and gas would only worsen the trend.

KS Drilling's rigs sat idle through successive restructurings, so the core asset generated no cash to service the debt.

Moratoria were extended repeatedly without the financial position improving, ending in outright default on the repayment schedule.

Management stayed within the founding family, and critical finance and operations executives were cut instead of the bloat.

The former CEO's 112 market-rigging charges destroyed creditor confidence in the group's stewardship during the workout.

Restructuring buys time, not viability: without utilised assets and professional management, each new moratorium just deepens the hole.

The High Court appointed Deloitte's Andrew Grimmett and Lim Loo Koon as interim judicial managers for KS Energy and KS Drilling. Richard Wiluan pledged full commitment to working with OCBC to resolve its concerns and maximise the interests of creditors and the company; his father stepped away to fight the 112 charges, which he disputes.