Sembcorp Industries

Sembcorp Industries: Jurong Aromatics Corporation (JAC), which operates one of the world’s largest petrochemical plants on Jurong Island, has been put into receivership after debt restructuring talks failed. Operations have been stalled since Dec 2014 after there was lack of working capital due to poor market conditions after the oil price decline.

PEC, a specialist engineering group that JAC owes money, has warned that it may be required to make specific provision of doubtful debts, depending on the outcome of its discussions with the receivers of JAC with regard to the payment.

Should the receivers of JAC decide to continue running the plant with a view to pay back the money owed to creditors, the chances of provisions incurred by Sembcorp Industries should be lower. Likewise, the inverse would likely result in provisions.

OCBC notes that JAC’s shareholding structure has been a rather complicated one (seven shareholders with the largest only having a 30% stake), and this may have hindered efforts to restart the plant since Dec. Hence some stakeholders could view JAC going into receivership a positive development compared to being in limbo and decision-making hampered.

Meanwhile, Sembcorp has not disclosed the amount that JAC owes it, but this should be much more than offset by the significant S$350m gain it expects to record this year from the disposal of its stake in Sembsita Pacific.