‘Banks continue to provide financing to viable businesses’

The-Association-of-Banks-in-Malaysia-oil-and-gas-companyPETALING JAYA: Banks will continue to provide access to financing for viable businesses, including the oil & gas (O&G) sector.

The Association of Banks in Malaysia (ABM), in a statement today, said this in response to a report on Sunday in Edge Malaysia titled “Oil and Gas Conundrum”.

ABM, which comprises 27 banks, said all O&G cases have been given due consideration.

“Credit evaluation is conducted on O&G companies similar to loan applications by any other industries.

“Feasibility studies, such as stress test analyses, due diligence and credit evaluation, are conducted as part of the standard assessment procedure to determine eligibility and viability.

“Common reasons for loan rejection beyond ineligibility include incomplete loan documentation and inadequate supplementary information required to support banks’ assessment of cash flows and financial buffers of companies.

“Delinquent loans ratio for the O&G sector stood at 0.1% while impaired loans ratio increased to 5% in the third quarter of 2017, due mainly to cash flow issues observed in service providers in certain upstream segments.

“Corresponding figures for the second quarter of 2017 were 0.2% and 4.5% respectively.

“However, risks to the banking system remained limited as exposure to the O&G sector accounted for about 6.5% of total exposures.”

The statement said the banking industry, together with Bank Negara Malaysia, had been engaging with the Malaysian Petroleum Resources Corporation (MPRC) to better understand developments in the O&G sector.

It is also disseminating information on avenues for assistance available for financially-distressed companies.

Viable corporate borrowers with multiple financial creditors can approach the Corporate Debt Restructuring Committee (CDRC) for assistance to work out feasible and market-driven debt resolutions through mediation.

More information on the eligibility criteria and application process to the CDRC can be found in this link: http://www.cdrc.my/

In addition, viable SMEs which are facing financial difficulties can seek assistance from the Small Debt Resolution Scheme (SDRS).

Assistance offered include restructuring or rescheduling (R&R) of financing facilities and provision of financing (where appropriate) to stabilise business cashflow while the SMEs implement business turnaround plan.

Members of the public may contact ABMConnect at 1300-88-9980 or via eABMConnect at www.abm.org.my for any enquiries relating to banking matters.

The Edge Malaysia had quoted chief executive officer Vaidyanthan Nateshan, whose company De Raj Group AG just got approval for a listing on the Frankfurt Stock Exchange in Germany, as saying he was forced to take his company to Europe as local bankers refused to provide the necessary support.

“We have bankers telling us they won’t touch oil and gas companies with a barge pole. So, I’m taking the company to Europe.

“It’s not the equity market that is tough, it’s the debt market. We are well capitalised but need financing for executing projects.

“The Malaysian debt market is dead … asset cover here is 2.5 to 3 times while in Europe, it is 0.8 times,” the business weekly quoted Vaidyanthan as saying.