Insights – Key takeaways on Debt Restructuring Strategies from ALB Asia Debt & Debt Restructuring Forum 2021
An engaging and insightful panel discussion on “Successful Debt Restructuring Strategies: Experience and Lessons Learnt” at the ALB Asia Debt & Debt Restructuring Forum 2021 held on 19 March 2021.
DHC Capital Partner, David Chew co-moderated the panel discussion with Holly Yuen (Head of Singapore, Madison Pacific) and panel members James Alexio (Senior Account Manager, Group Special Assets Management Singapore and Acting Head, GSAM Thailand) and Tham Wei Chern (Director, Fullerton Law Chambers LLC).
Key takeaways from DHC Capital from the panel discussion:
Increasing use of debtor led restructuring regimes: Trend towards debtor led schemes of arrangements for debt restructuring in Singapore (except in fraud cases). The automatic moratorium upon application to Court has been a powerful tool and a game changer for debtor companies as it provides essential “breathing space” for companies to put together a plan and work with creditors. Other features such as super priority rescue financing, cram down, ipso facto also favourable for the debtor companies
Key features of successful restructurings: Deals often involve 2 main elements: (i) injection of new capital / rescue financing as part of a broader restructuring or recapitalisation and (ii) faster resolutions – quicker deal cycles often involving accelerated M&A transactions or pre-pack schemes to reduce the time to completion and preserve the value in the business that would otherwise be lost in an insolvency
Restructuring landscape going forward and areas for development:
Expect to continue to see more debtor led restructuring processes (except in fraud cases). The model will involve the debtor company leading the process, hiring advisors with the expertise and network to find new investors (either strategic or financial - private equity or distressed funds), putting forward a restructuring solution and building consensus for the plan as opposed to a creditor led / enforcement / insolvency situation
Increasing use of super priority rescue financing as new or existing lenders provide new capital to support the debtor company when working capital is tight (click here for more information on super priority rescue financing)
Creditor classification in schemes becoming an increasingly contested area
Increasing use of specialists appointed as Chief Restructuring Officers / interim management / directors to the Board to support debtor companies and allow management teams to focus on the business operations
Development of a vibrant rescue culture where distressed debt investors acquire debt on the secondary market with a view to owning the company (i.e. loan to own situations), new investors provide new financing to companies or acting as stalking horses to acquire distressed companies
Special thanks to Asian Legal Business for hosting the event.
About Asian Legal Business
Asian Legal Business (ALB) is owned by Thomson Reuters, the world’s leading source of intelligent information for businesses and professionals. ALB is the publisher of a portfolio of leading magazine titles as well as organiser of numerous legal awards, conferences and summits within the Asia Pacific region.
