S&P: SingPost unlikely to see material cash from selling US e-commerce subsidiaries

Singapore Post SAM machines; taken at SingPost Centre in March 2018.

Singapore Post is unlikely to obtain material cash from the planned sale of assets by its U.S. e-commerce subsidiaries after impairment losses and settling outstanding claims, S&P Global Ratings said in a report Thursday.

On Thursday, SingPost’s troubled U.S. e-commerce businesses, Jagged Peak, TradeGlobal and TradeGlobal North America, filed for a Chapter 11 bankruptcy in the U.S., the postal and logistics company said in a filing to SGX Thursday.

Chapter 11 generally involves reorganization of a company’s debts and assets, including a plan to keep the business running and negotiating to pay creditors; the company’s creditors won’t be allowed to pursue debts or claims from prior to the filing.

S&P noted SingPost could be held accountable if TradeGlobal’s and Jagged Peak’s liabilities exceed sales proceeds, with the expected asset valuations and outstanding claims still uncertain.

SingPost has posted impairment losses on the U.S. subsidiaries of S$99 million, including S$31 million in intangible assets, as of the year ended 31 March, S&P said.

On the upside, deconsolidating the U.S. subsidiaries from SingPost’s financial report would likely improve the consolidated earnings before interest, tax, depreciation and amortization (EBITDA), S&P said.

“Exiting the U.S. market would also free up resources and management attention for the Asia-Pacific operations, where the company has a more natural competitive advantage than in the U.S.,” the report said.

S&P forecast SingPost would post up to S$260 million in EBITDA in fiscal 2020, on a pro forma post-deconsolidation basis.

The bankruptcy filing is credit neutral, as the financial impact is likely manageable, giving SingPost’s scale and rating headroom, with the assets already largely impaired, S&P said.

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