Tuesday, 24 Nov 2020

Singapore well-placed to meet rise in debt restructuring demand amid Covid-19

SINGAPORE – Recent debt restructuring cases underscore Singapore’s position as a regional insolvency hub, with the latest being a note holders’ go-ahead last week for a Jakarta-based conglomerate’s scheme to restructure US$231 million (S$311 million) of secured notes due next year.

The note holders, who are a class of creditors of PT MNC Investama holding at least 75 per cent value of the claims, voted last Thursday (Nov 5) in favour of the “pre-packaged” scheme of arrangement.

In a pre-packaged scheme, a debtor company can seek court sanction for a scheme without the need to go to court first to get leave to convene a statutory meeting, if the court is convinced the scheme would have passed, had a meeting been called.

PT MNC had earlier this year obtained a moratorium against creditor enforcement on the company’s assets from the Singapore High Court, said lawyer Tan Mei Yen, head of the insolvency and restructuring practice at Oon & Bazul.

“This pre-packaged arrangement procedure is particularly suited for less contentious restructurings where the significant majority of the company’s creditors are supportive of the scheme. In such cases, the procedure saves the time and costs associated with the convening of a statutory meeting, which also includes a court application for leave to convene the meeting,” she said.

PT MNC, whose business activities include media, financial services and lifestyle property, had issued US$231 million of the Singapore Exchange (SGX)-listed senior secured notes due in 2021.

Invoking the Insolvency, Restructuring and Dissolution Act (IRDA), the firm aimed, through the arrangement scheme, to replace the notes due next year with a mix of new notes and new shares, as it faced financial disruption from the Covid-19 pandemic, said the Global Restructuring Review, a London-based global publication on cross-border restructuring and insolvency law, last month.

Ms Tan said: “We have found the pre-packaged scheme of arrangement procedure to be popular with Indonesian companies seeking to restructure their bonds issued on SGX – we are currently advising at least one other major Indonesian group of companies in relation to a similar procedure.”

She said the application by PT MNC for moratorium protection under the IRDA is significant, because it is the first Indonesian company known to have made such an application.

“The High Court decision on the application earlier this year lends clarity and opens the door to other foreign companies in similar positions to seek to restructure in Singapore, and to apply for the moratorium protection that is available under Singapore’s restructuring regime.”

She added that Indonesia-based Modernland group very recently obtained moratorium protection in Singapore and is similarly seeking to adopt a pre-packaged scheme of arrangement.

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Industry players anticipate that given the economic distress caused by Covid-19 in the Asia-Pacific region, more companies will look to Singapore to carry out their restructuring.

“Cross-border insolvencies are regarded as a potential growth area, and there would be more impetus and opportunity for foreign insolvency cases to be ventilated or otherwise dealt with in Singapore,” said senior law partner Justin Chan from Tito Isaac & Co.

BlackOak managing partner Ashok Kumar said: “Singapore’s rise as a restructuring and insolvency hub will help to boost the legal and financial services sector in the country and grow the market.”

The Singapore market has also seen a rise in restructuring and insolvency activities.

Veteran lawyer Beatrice Yeo said there have been concerns raised here over firms commercially affected by the pandemic.

She noted that the Government has been addressing this area with moves such as a debt moratorium.

“At Yeo & Associates, we see a surge in companies and individuals seeking viable methods to provide assurance to their creditors, and also to pace their financial obligations to banks and financial institutions,” said Ms Yeo, the firm’s founder and managing director.

“They are actually doing their best to be responsible for their financial debts and liabilities. The new laws would provide an easier exit for clearly unsustainable businesses,” she added.

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Industry recruitment specialist Lee Shulin said the surge in interest in restructuring and insolvency (R&I) has led to an increase in demand for lawyers with expertise in the area over the last three years.

“There is a group of lawyers who get a continuous stream of R&I instructions, such as in boutique dispute firms, and this group of lawyers has been steadily increasing,” she added.

“Such developments and movements make manifest the significance of the industry as an up and coming area,” said Ms Lee, who is co-founder and director of legal and compliance recruitment firm Ansa Search.

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