With lots of negative news gushing from defaulting (and potentially defaulting) oil & gas bonds, you can imagine the anxiety that noteholders of AusGroup lived through of late.

They collectively had S$110 million on the line, and the clock was ticking fast towards the 20 Oct 2016 maturity date. 

Their anxiety turned to elation yesterday at the consent solicitation exercise, which paved the way for the first restructuring of Singapore corporate bonds in recent times.

AusGroup gets to extend the maturity date of the notes by two years, lifting a big overhang over it and inspiring confidence in its suppliers, customers and financiers. 

danielle team10.16LQM ad141eThey didn't neglect us, or evade us. They had proposals for us, we had counter proposals. AusGroup's management was transparent, we trusted them because they were sincere, and they assigned Martin from KPMG who listened to us. They explained every part of their business to us, we became realistic about the situation and we understood the best way for us to recover our investments in the company was for the company to survive. There are parts of the business that are doing well, and we just had to support them through this period."

-- Danielle Chan, noteholder. She is in the above photo taken after yesterday's meeting. Martin Wong (KPMG) is in the centre while Eng Chiaw Koon, MD and Executive Director of AusGroup, is at the extreme right.

Danielle Chan, the spokesman for the noteholders, told NextInsight: "The most important thing for us was that we have gone from being unsecured lenders to being secured creditors. AusGroup's Port Melville is the security, and we are ranked first among creditors. That is the jackpot for us." 

There's more: From 7.45% coupon, the noteholders will get 7.95% in the first year after the original 20 Oct 2016 maturity date of the notes and 8.45% in Year 2.

The interest will be paid monthly instead of bi-annually during the two years that the bond maturity date will be extended by.

Such sweeteners led to 385 votes (representing 98.47% of votes) cast in favour of the extraordinary resolution. 

Ms Chan said: "It was a joyous moment to see we had such a high consent percentage."

The outcome was hard won after multiple informal meetings that began some three months ago between the noteholders -- many of whom hold a single note of $250,000 while one investor holds $7.5 m worth -- and AusGroup led by its MD, Eng Chiaw Koon. 

"They didn't neglect us, or evade us. They had proposals for us, we had counter proposals," recounted Ms Chan. 

"AusGroup's management was transparent, we trusted them because they were sincere, and they assigned Martin from KPMG (as its financial adviser), who listened to us.  They explained every part of their business to us, we became realistic about the situation and we understood the best way for us to recover our investments in the company was for the company to survive.

"There are parts of the business that are doing well, and we just had to support them through this period. When we were on the same page, we just had to work out what was reasonable for the bond holders and what was reasonable for the company and for other creditors who were involved."

AusGroup's corporate development general manager, Richard Ling,  pointed out that AusGroup is not an asset-heavy O&G play, unlike some of those that face negative outcomes with respect to their bonds.

Instead, AusGroup operates in the maintenance and opex and scaffolding segments that support the O&G and mining industries in Australia.

"Despite the negative news in the O&G, we are still doing well and continue to grow and secure new contracts. With the bond restructuring, our balance sheet is strengthened, which is good news for our suppliers, customers, banks, etc," said Mr Ling.  

Details of the terms of the extraordinary resolution can be found in AusGroup's 13 Sept announcement.  


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