Logistics Construction Pte Ltd

Logistics Construction Pte Ltd, a Singapore building contractor incorporated on 25 April 1992 and a wholly owned subsidiary of Catalist-listed Boldtek Holdings Limited (BHL), applied in Originating Application No 726 of 2023 for a six-month moratorium under s 64(1) of the Insolvency, Restructuring and Dissolution Act 2018 (IRDA) while it worked on a scheme of arrangement.

The applicant said the COVID-19 pandemic and related restrictions had badly hurt the group's business, though it had been recovering, with an order book of about $79.4m as of 25 October 2022 and contracts worth about $119.1m awarded between June 2022 and January 2023. That recovery stopped when BHL called a trading halt in January 2023, later converted into a voluntary suspension, after its auditor qualified its opinion on the accounts for the year ended 30 June 2022. Contractors then tightened payment terms, some threatened proceedings, and the applicant faced payment demands, court claims and adjudications. It said the group was in talks with three investors for up to $6m, and it had appointed scheme managers. The scheme was likely to involve part cash repayment in tranches, new BHL shares for unsecured creditors and extinguishment of unsecured debt. Its sole secured creditor and by far its largest creditor, OCBC, and some others supported six months; others supported three months, objected, or took no position.

1. Whether there was a reasonable prospect of the proposed scheme working and being acceptable to the general run of creditors
2. Whether the application was brought in good faith despite the applicant's history of missed payments
3. Whether the moratorium should run for the six months sought or a shorter period

Applying Re IM Skaugen SE and other matters [2019] 3 SLR 979, the court treated a moratorium as extraordinary relief requiring a balance between breathing space for the company and protection of creditors. The procedural requirements were not in dispute, and the substantive test was whether, on a broad assessment, the proposed scheme had a reasonable prospect of working and being acceptable to the general run of creditors, supported by sufficient particulars.

The court accepted the application was made in good faith. The applicant had volunteered disclosure orders, and although the investments were tentative there was no evidence they were not genuine. Creditors' complaints about bounced postdated cheques and long-unpaid debts did not decide the matter, since an inability to pay is the very premise of a moratorium application.

OCBC's support carried weight. HYY Engineering argued it was not decisive because OCBC held only the premises as security, but the court held that a large creditor's support is critical to a rehabilitation, so the scheme was likely to be acceptable to the general run of creditors.

The particulars were sufficient but thin. Creditors such as Buildforms Construction said the scheme details were uncertain and inconsistent, it was unclear how much of the $119.1m could be recovered in the period, and HYY Engineering doubted the investor funding, including why one individual investor would put in $2m. A three-month moratorium balanced these concerns, leaving the applicant to show a reasonable prospect of success if it sought an extension; such an application would not be an undue drain on resources.

The High Court allowed the application in part. It granted the moratorium and the ancillary prayers, including the voluntary disclosure orders the applicant sought, but shortened the moratorium to three months instead of six.