Insights – Key takeaways from SmithNovak Asia Debt Conference 2024
We summarise the key takeaways from the SmithNovak Asia Debt Conference 2024 held in Singapore at The Westin Singapore on 20 June 2024.
Panel 1: Special situations and distressed debt
Hot spots for distressed activity:
India: Driven by structural reforms – (i) Banking regulator pushing banks to dispose NPLs has increased supply of loans and (ii) New insolvency laws, including laws barring promoters from bidding for their own companies (Section 29A) has encouraged promoters to come to the table and negotiate with lenders. Local asset reconstruction companies and private credit funds seeing opportunities to provide funding to stressed companies
China: Real estate sector continues to face challenges with high yield bond defaults. Before, developers seeking loan extensions, now pushing for loan deleveraging
Singapore: Legal framework is open to feedback from industry participants and continually seeking improvements (e.g. bringing in former US bankruptcy judges to handle restructuring cases in the Singapore court). The legal framework offers predictability and comfort to lenders. However, there has not been a lot of distress to test the framework and recoveries
Sourcing: Appetite for special situation deals ranging from US$10 million to US$20 million (small is beautiful) and for larger deals US$100+ million (big is beautiful)
Lender infrastructure: Having capabilities in restructuring and workouts is a key differentiator
Panel 2: Focus on South East Asia
Evolution of private credit: Growth driven by regulatory requirement for banks to hold more capital for risky loans. This has resulted in opportunities to provide growth capital where banks are not willing or able to lend and private equity is not available or expensive (dilutive)
Banks vs private credit: Private credit complimentary with banks. Private credit offers flexibility in terms (e.g. covenants, tenors, size, type of collateral) and acts as solution capital provider
Enforcement risks: Effective deal structuring using Singapore vehicles is a potential mitigating factor when lending to emerging South East Asia markets. Enforcing in local markets can be a challenge. Having a strong relationship with sponsor/borrower remains best approach to ensuring positive outcomes
About SmithNovak
SmithNovak is an events company founded in 2005 and is a leading organiser of summits and conferences for the global loans market.