SGX queries on New Silkroutes' liquidation of oil-trading unit

THE Singapore Exchange (SGX) has raised queries regarding New Silkroutes Group's wholly-owned oil-trading subsidiary, International Energy Group (IEG), which the group had not been successful in disposing. (see amendment note)

The agreement for the disposal of IEG to TK Energy lapsed on June 30 last year, after the buyer failed to disburse loans to New Silkroutes Capital and IEG.

In a regulatory filing on Wednesday, New Silkroutes said that in view of the global pandemic and the challenging energy market, the management and the board believe that the energy business is not sustainable and that IEG will not be able to fulfil its debt obligations - and this is after taking into account the cash flow projections commencing in the second quarter of 2021.

"In view of that, the board took the difficult decision that a creditors voluntary liquidation of IEG was appropriate and appointed provisional liquidators," said New Silkroutes.

New Silkroutes also disclosed to the local bourse that it is a corporate guarantor to a loan extended from Ocap Management to IEG.

IEG is also a corporate guarantor to the lease-financing arrangement of the bare boat charter agreement entered into by its subsidiary TXZ Tankers. If IEG defaults, New Silkroutes will become a corporate guarantor to the lease financing arrangement and its contingent liabilities.

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On the impact of the liquidation on the company, New Silkroutes said: "The board of directors feels that while there will be a liquidity crunch due to the creditors' voluntary liquidation of IEG, the impact will be minimised by the continuous operations and growth of the healthcare arm of the company together with corporate finance activities."

The group also said that after reviewing the financial forecast and cash flow projections, the board is of the view that the group can continue as a going concern. It added that the group has sufficient working capital and financial resources to meet its obligations as and when they fall due in the next 12 months.

Among reasons to support this view were the cost-cutting measures it has implemented, as well as the positive outlook for its healthcare operations.

In response to SGX regarding whether a trading suspension is required, New Silkroutes said it is not necessary, given that the group is still in operation. It added that its health and healthcare subsidiaries contributed US$13.62 million (S$18.06 million) in revenue in the first quarter of 2021 and is looking to grow its healthcare business.

Shares of New Silkroutes ended Wednesday at 22.5 Singapore cents, down one cent or 4.3 per cent.

Amendment note: An earlier version of this story incorrectly stated that the group had not been successful in winding up IEG. This is incorrect. The group was not successful in the disposal of IEG after the sale and purchase agreement lapsed and is currently in the process of winding up IEG.