Insights – Key takeaways on rescue financing from Legal Era 7th Annual Insolvency Law Summit 2022
An engaging and insightful panel discussion at the Legal Era 7th Annual Insolvency Law Summit 2022 held virtually on 14 October 2022.
Key takeaways:
Importance of certainty for rescue financiers coming into distressed situations. Elements to enhance certainty include:
Cramming down stakeholders with no economic interest
Use of early bird and lock up agreements to demonstrate support from creditors on key commercial terms
Key factors to be considered by distressed investors when assessing rescue financing opportunities:
Viable business post restructuring. Understand what went wrong, business plan and path to profitability
Capital structure dynamics
Industry dynamics. Is the company relevant? Does it need to be around? Does it have real IP, brand, differentiated product, synergies that would be value add to the investor
Valuation dynamics. Going concern value, liquidation value and value break analysis
Investment entry point. Consider options such as buying secondary debt in the fulcrum security as part of loan to own strategy, distressed M&A to acquire pre-insolvency, white knight investment or wait for insolvency sale
Downside protection. Security over hard assets or super priority status
Rescue financing regime in Singapore
Super priority regime established in 2017
4 levels of super priority
New laws have been successfully used in smaller cases
Primarily used by strategic investors to control the restructuring process (i.e. exclusivity, right to access of information and right to access with management) with a view to being a major equity holder in the restructured company
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