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Sembcorp Marine Debts Prompt Concern

Posted on February 22, 2016

By Xiaolin Zeng, IHS

Singapore-based rig-building and ship repair group Sembcorp Marine‘s debt levels are on the high side and it could struggle to fulfil its debt covenants, sector analysts have cautioned.

At 31 December 2015, Sembcorp Marine’s long-term debt stood at SGD2.6 billion (USD1.9 billion), while shareholders’ equity stood at SGD2.5 billion, indicating a gearing ratio of 1.04:1.

UOB Kay Hian Securities analyst Nancy Wei noted, “Net gearing spiked up from 67.5% in the first nine months of 2015 to 109.5% in the fourth quarter, as Sembcorp Marine made a net loan drawdown of SGD594 million to meet its cashflow requirements. The rise in net gearing is cause for concern as Sembcorp Marine is required to maintain a net gearing ratio below 175% to stay within its financial covenants. This leaves it with approximately SGD1.6 billion debt headroom.”


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