Thursday, 26 March 2020

Personal Updates: "Voluntary" Pay Cut and Restructuring Plan For Company

The COVID-19 crisis suddenly freeze up business transactions almost overnight. Many countries are in lock down. Malaysia just extended their lock down for another 2 weeks to mid April'20. My office phone keep ringing non-stop with many fellow managers asking me what to do with their Malaysian workers who are either trapped in Malaysia or where to house their Malaysian staff. 

It does not help when my Managing Director called me up one night (I mean literally night time) and asked for my help to take a "voluntary" paycut in order to showcase to our Corporate Head Office that we are taking action to ensure the survivability of our Singapore business where business volume supporting retail clients crashed by 70% to 90%. The strange thing is that although my boss said that it is a "voluntary" pay cut request till end of the year, he made it sound like it is mandatory. So no choice, have to take a voluntary 10% paycut. 

One week after that, my boss told me to assist him in the preparation of the dreaded restructuring plan for the entire Company. This really sucks. On top of that, one of my holdings Eagle Hospitality Trust  (ËHT") suddenly announced that it is in default of bank covenant and that USD 341Mil of syndicated bank loan became due immediately and it is not paying out announced dividends- a result of the curse of COVID-19. Anyway, during my last posting on EHT, I have already mentioned that holders of EHT better be prepared for a full write off of their investments similar to Hyflux case.  I should probably do another post on EHT soon on what to expect. Basically, for those who are still vested at this juncture, the longer the whole episode drag on the better will be the net realizable value. Fire-sales asset selling during this crisis time will depress the price and leave nothing to shareholders after paying off the bank loan. 

Stock Market Rally For Past 2 Days- Dead Cat Bounce?
The rally in Singapore stock market is being fueled by the cash injection and government rescue packages being announced worldwide in particularly the USA. However, this comes amidst worsening COVID-19 situation in Europe, USA, India and Asean countries. Stimulus packages will eventually run out of steam if the underlying root cause is still plaguing the global economies. I am actually anticipating another big plunge in the stock market coming up after the recent short rally as fundamentally, nothing has changed and costly disruption to economies are still ongoing. 

Parting Thoughts
We can only hope that the virus will mutate into a less severe strain and then disappear on its own during the upcoming warmer months.

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