By Mak Yuen Teen

This is not the story about a 60s rock and roll band called “Ezra and the Tri-tanic” but it is my interpretation of the rise and fall of the Ezra group of companies – Ezra Holdings, Triyards Holdings and EMAS Offshore. I call them the Tri-tanic. There are five parts to this series and here is the first part.

The Good Old Days

Established in 1992 by Lee Kian Soo and his wife, Goh Giak Choo, Ezra Holdings Limited (Ezra) grew from a small family-owned company to become a darling of the Singapore Exchange (SGX).

When Ezra was established, it managed and operated small-scale offshore support vehicles. Riding on the wave of the deep-water exploration and production industry, Ezra began constructing its very first seven support vessels with systems and technology which were said to have exceeded industry’s expectations. Subsequently, Ezra expanded its business to include three main divisions, providing a full spectrum of engineering, construction, marine and production services globally.[1]

Ezra went public on the then Sesdaq board in 2003, debuting at 34 cents. In late 2005, it moved to the Mainboard. Its future looked bright up until 2015, as it never once saw red from its establishment up to that time. Regular dividends were paid to its shareholders and the company was optimistic about its outlook. Lee’s son, Lionel Lee Chye Tek, then joined the business and was appointed a director in March 1999, becoming the Group CEO and Managing Director (MD) in August 2012.[2]

Photo by mostafa meraji on Unsplash

Not So Happily Ever After

In September 2014, media reports said that the Ezra co-founders  agreed to resolve a six-year legal battle over S$208 million of marital assets that included a stake in Ezra.[3] It was reported that Lee Kian Soo, his now ex-wife and their elder son Lionel, dropped their challenges to a Singapore High Court ruling at the beginning of that year after agreeing to a confidential settlement.

Lee was earlier ordered to pay Goh S$56 million, including a possible transfer of as much as a 6.2 percent stake in Ezra. Goh had failed in getting a S$40,000 monthly maintenance.Goh said that her ex-husband and son colluded to dissipate assets after she had filed for divorce, citing “significant differences” including disregard for her Catholic faith and his suspected infidelity. Lee had transferred the Ezra shares at 45 Singapore cents to Lionel in 2009 and 2010, which was at a substantial discount to the then market price. Lee had claimed that the 45 cents price was arrived at because he was born in 1945.

Three years later, it was Ezra’s turn in the courts as it filed for Chapter 11 protection with the US bankruptcy court.

What exactly happened?

Expanding the Flotilla

In February 2007, EMAS Offshore Limited (EOL) (formerly known as EOC) was incorporated in Singapore as a subsidiary of Ezra. It provides offshore support, accommodation and offshore production services to customers in the oil and gas industry. After listing on the Oslo Børs/ Oslo Stock Exchange (OSE) in October 2007,[4] it obtained a secondary listing on SGX in October 2014 through a public offer of 9.085 million shares and a placement of 39.5 million shares at S$1.21 per share. DBS Bank was the issuer manager, with OCBC Bank joining it as joint book runners and underwriters.[5]

As a company with a primary listing on OSE and a secondary listing on SGX, EOL complied with the listing rules of OSE and was exempted from compliance with the SGX Rulebook (except rules 217 and 751).  It opted to comply with Norwegian corporate governance standards as set out in the Norwegian Code of Practice for Corporate Governance, instead of the Singapore Code of Corporate Governance.[6]

At the time of its secondary listing, the elder Lee was executive chairman and advisor, while his son Lionel was non-executive vice-chairman.[7] Following EOL’s secondary listing, Ezra had direct and deemed interest in EOL amounting to 69.15%. Later that same month, EOL reported FY2014 net profit of US$54 million and said that it was entering FY2015 with “stronger earnings visibility”.[8] In March 2015, it announced a US$500 million multi-currency debt issuance programme and seemed poised for growth.[9]

The third piece of the “Tri-tanic”, Triyards Holdings, was listed on the Mainboard in October 2012 through a 1-for-10 in specie distribution of Triyards shares to Ezra shareholders.[10] After the listing, Ezra held 67% of Triyards shares.[11] Lionel Lee was the non-executive chairman.[12]

Triyards’ business is in engineering and fabrication services, with “the capability to undertake large-scale projects to fabricate different components of fixed platforms, as well as vessel conversion and construction”.[13] It announced record revenue and profits for FY12 shortly after its debut on SGX.[14]

Masters of the Seas

Based on the 2015 annual reports, Lionel Lee has direct and deemed interests totaling 23.19% in Ezra, including shares held through Jit Sun Investments Pte Ltd (Jit Sun), which is 100% owned by him. Lee Kian Soo has a 1.54% stake. Ezra has two other substantial shareholders, Credit Suisse AG which has a deemed interest of 5.27% and Frontica Global Employment Limited, with 0.34% direct interest and deemed interest in the 7.04% stake held by DNB Bank ASA.[15]

For Triyards, Lionel Lee has direct interest of 5.23%, and deemed interest of 62.03%, including in the 60.91% stake held by Ezra and shares held by Jit Sun. Lee Kian Soo has 1.5 million shares, or less than a 0.5% stake.[16]

Ezra held 75.25% of the shares in EOL but the Lee’s do not have any direct stakes in the company.[17]

In other words, the effective beneficial interests of the Lee’s in the three companies were 24.73% in Ezra, 21.31% in Triyards, and 18.61%. However, they effectively controlled all three companies by virtue of their direct and deemed interests, including in shares held by Ezra which controls both Triyards and EOL – and through holding key board and senior management roles in the three companies.

There were a number of interlocking directors among the three companies, with some directors and key management moving among the three companies.

Ezra Holdings

In FY 2015, the board of Ezra consisted of eight directors, namely, Group CEO and MD Lionel Lee, non-independent non-executive chairman Koh Poh Tiong, five independent directors (IDs), along with the elder Lee himself who was a non-executive non-independent director (NED). [18] Two of the IDs, Ho Geok Choo Madeleine and Tan Cher Liang joined in 2015. With IDs making up more than half of the board, Ezra complied with the Code of Corporate Governance 2012 (the “Code”) for companies without an independent chairman.[19]

Figure 1 shows the board of directors based on the FY2015 annual report.

Figure 1: Board and Board Committee Composition as at FY2015

Name Age Year of first appointment Background Type of director Committee

 
Koh Poh Tiong 69 2011 F&B industry, management NED and Board Chairman AC, NC, RC, ERC, EXCO
Lee Kian Soo 70 2000 Founder, shipping and offshore support services industry NED EXCO
Lee Chye Tek Lionel 42 1999 Founder’s son, drove growth and listing of Ezra ED EXCO
Eng Heng Nee Philip 69 2012

 

 Automotive, finance, accounting ID (lead) AC, NC (C), RC, ERC (C), EXCO (C)
Ngo Get Ping 57 2007 Property, finance ID AC, NC, RC (C), ERC
Ho Geok Choo Madeleine 59 2015 Human resources ID AC, NC, RC, ERC
Soon Hong Teck 57 2008 Finance, accounting ID AC (C), NC, RC, ERC
Tan Cher Liang 63 2015 Audit, management ID

Note: ED = executive director; ID = independent director; NED = non-independent, non-executive director; AC = audit committee; ERC = enterprise risk committee; EXCO  = executive committee; NC = nominating committee; RC = remuneration committee; C = committee chairman

The board had five committees: Audit Committee (AC), Nominating Committee (NC), Remuneration Committee (RC), Enterprise Risk Committee (ERC) and Executive Committee (EXCO). While the ERC and AC met four times in FY2015, the NC and RC only met once.[20] However, the EXCO met 14 times.

The directors brought a range of skill sets and corporate experiences, ranging from management, human resources, to accounting and finance, and across industries such as food and beverage, real estate, management consulting and audit. Neither the chairman nor any of the IDs had any prior management experience in the sector.[21] Koh, the chairman, was former CEO of Asia Pacific Breweries, and then CEO of the food and beverage division of Fraser and Neave.

Lead ID, Phillip Eng, who held the position of Chairman of the NC, ERC and EXCO, was also the independent chairman of REIT manager, Frasers Centrepoint Asset Management, and non-independent chairman of SGX-listed mDR.[22]

Although the company mentioned that remuneration is commensurate with performance, the it did not disclose either the indicators used to determine performance, or how the levels and mix of remuneration were determined for directors and key management. The total remuneration for each director was disclosed in bands of S$250,000 and each component of the pay was disclosed in percentages, with the board citing that they believed that it was not in their best interest to disclose the actual exact amounts paid to directors.

Koh, Lionel Lee and Lee Kian Soo were the highest paid directors, each earning S$500,000 to S$750,000 in total for the year. Lionel did not receive any variable remuneration component. Lee received 88% and Koh 56% respectively of their fees in the form of “advisory fees and other benefits”.[23]

Triyards Holdings

At Triyards, there was a slate of board changes in FY2015. Lionel Lee, who was non-executive non-independent chairman, resigned from the board on 1 May 2015, together with Chan Eng Yee, the CEO and Andrew Mak Yeuw Wah, the Chief Operating Officer (COO), who both resigned as EDs but retained their executive roles. Chan has a long history with the group, and prior to his appointment at Triyards, was CFO of EOC Limited, the predecessor to EOL. Mak joined the group in 2012.[24]

Lee Kian Soo succeeded his son as non-executive chairman and chaired the four-member board. Nguyen Van Buu resigned as ID on 1 February 2015 and was replaced by Simon Charles Lockett.[25] After these changes, there was no ED on the board. In fact, the reason given for the resignations of the two EDs from the board was so that the board comprised only NEDs, although the company did not explain why this was desirable for Triyards compared to Ezra, EOL and most other listed companies in Singapore. While there are pros and cons of wholly non-executive boards, under the Singapore Companies Act, executives who are not directors are not subject to the same duties as those who are named as directors (unless they are deemed to be de facto or shadow directors).

There were three committees – AC, NC and RC – all with three members who were IDs. The lead ID of Triyards, Soh Chun Bin, was an equity partner at Stamford Law Corporation, before joining Cedar Strategic Holdings, followed by Changjiang Fertilizer Holdings, as CEO. He chaired the NC and was a member of the AC and RC. He joined the board in August 2012.

Ms Loy Juat Boey, who joined in September 2013, chaired the AC and was a member of the NC and RC. She retired from Asia Pacific Breweries as Director, Group Finance, in January 2013, after previous stints in Ernst & Young and a packaging company. Simon Lockett joined the board in February 2015, after a ten-year stint as CEO of an oil and gas exploration and production company listed on the London Stock Exchange and at Shell prior to that. Lockett chaired the RC and was a member of the AC and NC. He was also deputy chairman and independent director at SGX-listed Loyz Energy, later renamed as CWX Global.[26]  Lockett has since left Loyz Energy/CWX Global. Interestingly, Lionel Lee’s brother, Lee Chye Cheng Adrian, is now an independent director at CWX Global, having previously been a Managing Director, then NED before being subsequently redesignated to ID. But that’s another story…..

The remuneration of all the NEDs was disclosed in a single band of up to S$250,000, with Lee Kian Soo and Lionel Lee each receiving just under half of their total fees as “advisory fees and other benefits”. For five EDs and key executives, their remuneration was disclosed within a band of S$250,000 to S$500,000.[27]

EMAS Offshore (EOL)

Over at EOL, Lee Kian Soo was executive chairman of the five-member board. Prior to his resignation as a director in April 2015, Lionel Lee was non-executive vice chairman. Capt. Adarash Kumar was CEO and ED. He first joined EOL as a NED in August 2014, before becoming an ED in May 2015 and CEO in September 2015. Kumar has more than 35 years of experience in the marine industry.[28]

The three IDs were Cuthbert I.J. Charles, who chaired the RC and served on the AC and NC; and Dr Wang Kai Yuen who chaired the AC and served on the NC and RC; while Dale Bruce Alberda chaired the NC and served on the AC and RC. Charles has more than 30 years of experience in the oil and gas industry in UK, US, Singapore and India, having worked for 33 years with Haliburton. Alberda has a background in accounting and finance, and more than 30 years of experience in the finance and maritime sectors. Dr Wang has a PhD in engineering from Stanford University and was a former Member of Parliament in Singapore. His last executive role was a Managing Director of Xerox Singapore Software Centre. Including EOL, he served on the boards of eight companies listed in Singapore, including China Aviation Oil (Singapore) and Ezion Holdings. He was independent chairman of Ezion Holdings.[29]

Lee Kian Soo was disclosed as receiving remuneration of above US$500,000, mostly in salary and CPF, while the NEDs were disclosed as receiving remuneration of  “up to US$250,000”. The remuneration of the five key management personnel was disclosed in bands of “above US$500,000” for the CEO, and “US$250,000 to US$500,000” for the other four.[30]

Part II covers the period from early 2014 when the group was aiming to consolidate its position as one of the largest offshore services players in the Asia-Pacific, its focus on the subsea business, and Triyards’ push to diversify its offerings in vessel construction, as oil prices started to fall.

Note: This series of articles draws on certain part of a case study written by Cliff Seah Wen Jie, Goh Mei Qi, Hu Jingyi, Kelsey Feng Qiqi and Liu Yuchen, BBA (Accountancy) students at NUS Business School, under the supervision of Associate Professor Mak Yuen Teen. It has been written solely from public information, including media reports.

ENDNOTES (Note: Draft only)

  1. http://www.ezraholdings.com/about/corporate-profile/
  2. https://links.sgx.com/1.0.0/corporate-announcements/V5HHQGXCIZJBI0AE/43cece75033bdb674f7c9567f81f8cc300ed13cab998911c2c24d5ef1637ecea
  3. https://www.bloomberg.com/news/articles/2014-09-22/ezra-founders-resolve-s-208-million-divorce-asset-fight
  4. http://www.emasoffshore.com/about-us/corporate-profile/
  5. http://emasoffshore.listedcompany.com/newsroom/20141003_184248_UQ4_DK46Y63KFBXZDKQJ.1.PDF
  6. http://emasoffshore.listedcompany.com/misc/ar2015.pdf
  7. http://emasoffshore.listedcompany.com/misc/EMAS_Offshore_Limited_Prospectus_29September2014.pdf
  8. http://emasoffshore.listedcompany.com/newsroom/20141023_141549_UQ4_ZX58HD7CMZRNRRR9.1.pdf
  9. http://emasoffshore.listedcompany.com/newsroom/20150305_233811_UQ4_FPPTMWZJAMWHMJMZ.1.pdf
  10. http://triyards.listedcompany.com/newsroom/20121018_174653_RC5_6A2FEADA812A4A7F48257A9B0034315F.1.pdf
  11. http://triyards.listedcompany.com/misc/Intro_Doc_Triyards_Holdings.pdf
  12. http://triyards.listedcompany.com/misc/Intro_Doc_Triyards_Holdings.pdf
  13. http://triyards.listedcompany.com/misc/Intro_Doc_Triyards_Holdings.pdf
  14. http://triyards.listedcompany.com/newsroom/20121024_172838_RC5_E7A8D4B92A30916348257AA100337FB8.1.pdf
  15. Ezra 2015 Annual Report
  16. Triyards 2015 Annual Report
  17. EMAS Offshore 2015 Annual Report
  18. Ezra Holdings. (2015). Annual Report 2015. Retrieved April 15, 2019 from http://www.ezraholdings.com/wp-content/uploads/2017/07/ar2015-1.pdf
  19. Ezra Holdings. (2014). Annual Report 2014. Retrieved April 15, 2019 from http://infopub.sgx.com/FileOpen/Ezra%20AR%202014.ashx?App=Prospectus&FileID=24898
  20. Ezra Holdings. (2014). Annual Report 2014. Retrieved April 15, 2019 from http://infopub.sgx.com/FileOpen/Ezra%20AR%202014.ashx?App=Prospectus&FileID=24898
  21. Ezra Holdings. (2015). Annual Report 2015. Retrieved April 15, 2019 from http://www.ezraholdings.com/wp-content/uploads/2017/07/ar2015-1.pdf
  22. Ezra Holdings. (2015). Annual Report 2015. Retrieved April 15, 2019 from http://www.ezraholdings.com/wp-content/uploads/2017/07/ar2015-1.pdf
  23. Ezra Holdings. (2015). Annual Report 2015. Retrieved April 15, 2019 from http://www.ezraholdings.com/wp-content/uploads/2017/07/ar2015-1.pdf
  24. Triyards Holdings 2015 Annual Report
  25. Triyards Holdings 2015 Annual Report
  26. Triyards Holdings 2015 Annual Report
  27. Triyards Holdings 2015 Annual Report
  28. http://emasoffshore.listedcompany.com/misc/ar2014/ar2014.pdf
  29. http://emasoffshore.listedcompany.com/misc/ar2015.pdf
  30. http://emasoffshore.listedcompany.com/misc/ar2015.pdf