18 months on ……
"Opportunities don't happen. You create them."
Chris Grosser
I launched DHC Capital 18 months ago and I am proud of what we have achieved in this time. We set up a new firm from scratch and through hard work and being opportunistic won work in the market (click here to read our 6-month update and 1-year update). We built on this momentum and continued to expand our network. Through this, we identified new opportunities in the market that allowed us to get involved in bigger, more complex and higher profile engagements (click here to see our engagements).
A few highlights of the engagements we have been involved in during the last 6 months include:
Completed debt rescheduling with institutional lenders for AGV Group Ltd (SGX: 1A4)
Director and interim management appointments to support multi-stakeholder restructurings for both private and public listed companies
Distressed M&A transaction involving a sale of 21% equity stake in an SGX listed company
We wanted to share some brief thoughts on the state of the markets and where we see pockets of opportunity for distressed debt investors and advisors. The global macro-economic indicators point to a position late in the market cycle, there is increasing distress in retail and consumer sectors globally, there are higher default rates in China and just recently an inverted yield curve for 3 month/10 year (a predictor of the last seven recessions). With an economic slowdown potentially on the horizon, we see the following themes for the remainder of 2019 and into 2020:
More Asian restructuring situations as overleveraged and underperforming companies find it harder to refinance or raise new capital in a tighter credit environment – this could result in “fallen angels” or restructured companies attempting “restructuring 2.0” (or even “restructuring 3.0”) leading the next wave of restructuring activity
Sector specific opportunities as certain sectors facing structural challenges will result in companies being forced to act quickly and make hard decisions to preserve cash to extend the liquidity runway and which may ultimately require a restructuring to right-size the capital structure (we won’t name the sectors here, but if you are interested, please reach out to us)
Lots of dry powder from special situation and credit funds to invest in the region. Key challenge will be whether there are the right opportunities in the market to deploy these funds and the impact on deal terms and pricing as the funds chase a limited number of quality financing deals and compete against strategic investors to acquire distressed assets
We also wanted to share our thoughts on Singapore’s much talked about (and hyped) “turbo charged” scheme of arrangement regime as we approach the 2-year anniversary mark. Let’s start with a recap of the new regime - the new regime provides companies with an automatic and strengthened extra territorial moratorium, super priority rescue financing, cram down and pre-packs, frameworks for greater judicial cooperation and in the latest update a restriction on ipso facto clauses to name a few of the reforms that are designed to push Singapore to become a major cross-border restructuring hub. Our key observations. The filing companies have been local Singapore incorporated companies (the highest profile being Hyflux). There has not been the take up from regional or international companies. There have been rumblings in the market that the system has become too debtor friendly, especially in relation to the granting of the moratorium and disclosure of information (or lack of). We do note that the Court has been willing to attach conditions to the moratorium or other orders to protect creditor interests and mitigate some of these perceptions. There has not been a super priority financing completed although we are aware anecdotally of many companies that have actively considered the merits and feasibility of new rescue financing. The first big test will be Hyflux’s restructuring. Time will tell the success of the new laws. Stay tuned.
I am grateful to our clients, partners and friends who have supported and trusted us. Thank you for your support and trust.