We need to talk about liquidity

SEMBMARINE announced on Sept 7 that it had received 90.2 per cent of valid acceptances for the nearly 10.5 billion shares available under the rights issue it launched in June.

That SembMarine's rights issue was undersubscribed illustrates the challenge Singapore's public companies are facing to gain strong shareholder support for recapitalisations that are often essential to address balance sheet weakness and liquidity crises caused by the global Covid-19 pandemic.

Falling demand and supply chain disruptions have led to plunging profits among Singapore's public companies during the first half of 2020. As cash flow and liquidity has declined many companies have initiated plans to try to mitigate the negative impact on their balance sheet by cutting operating costs, triggering force majeure clauses in contracts, rescheduling debt repayments and slashing dividends and share repurchase programmes in efforts to retain as much cash as possible.