Singapore on covenant alert

摘要

Consent solicitations are coming in thick and fast in Singapore's bond market as companies exposed to the economic downturn seek relief to avoid breaching financial covenants on their debt. Credit analysts say the prolonged slump in the oil industry has brought some issuers close to the minimum interest coverage ratio of 3x required in the bulk of bond contracts, which gives holders the right to demand immediate repayment should an issuer's earnings fail to cover at least three periods of interest expenses. "A breach would prove catastrophic, due to cross-default clauses on certain secured/ unsecured debt that they hold," said UOB Kay Hian analysts Lim Siew Khee and Yeo Zhi Bin. The interest coverage ratio indicates a company's ability to service its debt. A minimum healthy ratio would typically be 3x or more.