Marina Ltd is a Singaporean company, listed on the Singapore Stock Exchange Main Board. It is a typical mid-sized manufacturing company, specialized in steel bars, mostly used in construction, and its sales cover the entire South East Asia region. You are a credit advisor at OUB (a local Singaporean bank), member of the credit committee for companies with turnover between 50 million and 2 billion SGD. While UOBs strategy is to strongly support the countrys small, medium and large enterprises, Marina has no banking relationship with UOB so far. In June 2019, one of the banks corporate banking relationship managers, John Koh has approached Marina to establish a banking relationship. After lengthy discussions with Mr Liu, Marinas CFO, John Koh has drafted a credit application for a 20 million Singapore Dollar (SGD) 5 years loan, to be repaid in fine. Given its credit risk, Marina would borrow at Libor + 1.85%. He noted in his credit application that according to Mr Liu, Marinas cash pile has been earmarked for the acquisition of more storage facilities across the region, in order to be closer to their end-customers, and that the loan would mainly be use to retire some of the existing short-term debt. Besides, John Koh is also considering lending 2 millions SGD over 5 years to Mrs Tan, Marinas main shareholder in a personal capacity. The use that Mrs Tan would make of the funds is not disclosed, but she is deemed to be a wealthy person and has accounts at various private banks in Singapore, such as Bank of Singapore and UBS (but not with UOB Private Banking). It is also noteworthy that the MAS (Singapores Central bank) has just reduced the level of interest rates in SGD along the FED in the US, to try and revive a rather sluggish level of economic activity. As a credit adviser, produce for the credit committee an independent advice on the decision to grant or reject the two credits, based on a thorough financial analysis and the use of expert tools on the credit risk of the company and Mrs Tan. You are provided with Marinas simplified financial accounts for the last 3 years as well as some financial ratios. The Balance Sheet, Income Statement and CashFlow statement are given in Excel format to facilitate the vertical analysis and ratios computation.

PARSER Principle of borrowing, financial ratios for capacity, risk premium

MARINA - Income Statements in SGD 000) 2016 2017 147,640 193,342 2018 198,856 Net Sales Cost of Good Sold 95.966 127,223 128,985 Selling, general and administrative Expenses 22,685 23,492 24,186 R&D 0 0 0 Gross margin (EBITDA) 28,989 42,627 45,685 Depreciation 9,600 10.600 10.600 Operating Income (EBIT) 19,389 32,027 35,085 Interest Expenses 4,316 4,922 4.946 Income before taxes 15,073 27,105 30,139 Exceptional gain (loss) 0 0 0 Income Tax 3,010 2,562 3,594 Net Income 12,063 24,543 26,545 MARINA - Income Statements in SGD 000) 2016 2017 147,640 193,342 2018 198,856 Net Sales Cost of Good Sold 95.966 127,223 128,985 Selling, general and administrative Expenses 22,685 23,492 24,186 R&D 0 0 0 Gross margin (EBITDA) 28,989 42,627 45,685 Depreciation 9,600 10.600 10.600 Operating Income (EBIT) 19,389 32,027 35,085 Interest Expenses 4,316 4,922 4.946 Income before taxes 15,073 27,105 30,139 Exceptional gain (loss) 0 0 0 Income Tax 3,010 2,562 3,594 Net Income 12,063 24,543 26,545