Non-Performing Corporate Loan Toolkit for Banks

Singapore’s restructuring and insolvency regime offers a wide variety of tools for dealing with corporate non-performing loans and loan defaults. To avoid the “man-with-a-hammer” syndrome, it is important to understand the nuances of these tools and how they can be suitably deployed in different scenarios. The sophistication of the tools has greatly increased with legislative enhancements made in recent years. This allows borrowers and lenders alike to formulate bespoke strategies that best suit each particular situation.

This note summarises the key features of the restructuring and insolvency options in Singapore, and sets out a decision-making matrix to guide banks and other lending institutions in selecting which options may be preferred under various conditions.

Singapore High Court Rules That Lock-Up Agreements Will Not Generally Fracture Scheme Classes

In the first reported Singapore decision of its kind, the General Division of the Singapore High Court (“High Court”) held, subject to certain caveats, that creditors who enter into lock-up agreements generally need not be placed in a separate class from other creditors for the purpose of voting on a scheme of arrangement (i.e., the lock-up agreements would generally not fracture the class of creditors for the purposes of voting): Re Brightoil Petroleum (S’pore) Pte Ltd [2022] SGHC 35 (“Brightoil”).

Section 440 of the Insolvency, Restructuring and Dissolution Act 2018: Restrictions on Ipso Facto Clauses

Commercial contracts often contain ipso facto clauses – clauses that allow one party to terminate the contract or exercise certain rights if specified events occur, usually if the counterparty becomes insolvent or enters insolvency proceedings. The Insolvency, Restructuring and Dissolution Act 2018, which was passed in October 2018, introduced restrictions on the operation of certain ipso facto clauses while a company is undergoing restructuring proceedings. This article discusses the implications of the new ipso facto regime, potential areas of uncertainty, and issues which practitioners should consider when advising on and drafting commercial agreements, in light of the new regime.

Roll-up rescue financing in Singapore: Giving old debt senior priority

At its introduction into Singapore’s restructuring laws in 2017, rescue financing was heralded as value enhancing and associated with a higher probability of successful recovery for distressed companies. This article discusses the application of the rescue financing regime, including the first instance of a roll-up, and the way forward for rescue financing in Singapore.

Ipso facto protection: As dead as the language and rightfully so?

Singapore’s new omnibus insolvency legislation introduces a restriction on the enforcement of ipso facto clauses against a company on the basis that it has commenced certain restructuring proceedings or become insolvent. This article compares Singapore’s approach to those of other jurisdictions, analyses how the new legislation is likely to operate in the context of loan documentation, and argues that the abolition of ipso facto protection is a welcome development.

Singapore Court of Appeal Endorses Test for “Unfair Prejudice” and Intervening in Judicial Managers’ Decisions

The Singapore Court of Appeal has, for the purposes of determining “unfair prejudicial” conduct under section 227R(1) of the Companies Act (now section 115(1)(a) and (b) of the Insolvency, Restructuring and Dissolution Act 2018 (“IRDA”)), endorsed a two-stage test to determine whether a judicial manager has acted or proposed to act in a manner which would unfairly harm the interests of the applicant: Yihua Lifestyle Technology Co, Ltd and another v HTL International Holdings Pte Ltd and others [2021] SGCA 87.

The emergence of a debt restructuring regime for corporate groups in Singapore

Debt restructurings involving corporate groups pose unique challenges. There is often a need for debt restructuring solutions that address the financial problems across an entire corporate group. The law in Singapore has developed in an incremental and principled way that, while not immediately apparent, lays strong groundwork for effective restructuring of corporate groups. In this article, we illustrate the potential of the Singapore regime in this context by examining the 2019 decision of the Court of Appeal in Pathfinder Strategic Credit LP v Empire Capital Resources Pte Ltd [2019] 2 SLR 77 and related legislative developments in the area, and conclude with thoughts on how the law may develop further.

The restructuring of corporate bonds in Singapore

Large-scale restructurings in modern times almost invariably involve bonds and other debt securities. In this article, we discuss the mechanisms and processes for restructuring bonds in Singapore, and highlight common legal and practical issues that arise in bond restructurings. This article should interest not only Singapore restructuring practitioners, but also international practitioners whose clients may want to leverage on the robust, efficient and well-developed Singapore regime to implement complex debt restructurings.

The swift and silent restructuring of Singapore’s Pacific International Lines

On 31 March 2021, the world’s 12th largest liner company and Southeast Asia’s largest carrier Pacific International Lines (PIL) announced the completion of the US$600 million investment by Heliconia Capital Management. The investment, which has resulted in Heliconia obtaining a majority shareholding stake in the PIL group, marked the completion of PIL’s US$3.3 billion debt restructuring which involved a combination of a US$1.1 billion scheme of arrangement as well as an out-of-court restructuring of the company’s remaining debts.

Navigating Between Scylla and Charybdis: Singapore High Court Clarifies Test for “Unfair Prejudice” and Intervening in Judicial Managers’ Decisions

The Singapore High Court has clarified the test for determining when the court should, under section 227R of the Companies Act (now section 115 of the Insolvency, Restructuring and Dissolution Act 2018), intervene in decisions made by a judicial manager in managing the affairs of a company: Re HTL International Holdings Pte Ltd [2021] SGHC 86.

Singapore Court of Appeal Clarifies Test for Determining Company’s Inability to Pay Debts and Right to Appeal Winding Up

In Sun Electric Power Pte Ltd v RCMA Asia Pte Ltd (formerly known as Tong Teik Pte Ltd) [2021] SGCA 60 (“Sun Electric”), the Singapore Court of Appeal held that:

(a) The cash flow test is the sole test under section 254(2)(c) of the Companies Act (re-enacted as section 125(2)(c) of the Insolvency, Restructuring and Dissolution Act (“IRDA”)); and

(b) A company has the right to appeal a winding up order regardless of whether a stay order is granted, and its directors can control the conduct of the appeal.

The Court of Appeal also stated, in obiter, that a company which partially pays off a statutory demand within three weeks, causing the remaining amount payable to fall below the prescribed threshold (which was $10,000 under the Companies Act and now $15,000 under the IRDA), will not be deemed to be unable to pay its debts under section 254(2)(a) of the Companies Act (re-enacted as section 125(2)(a) of the IRDA).

Insolvency, Restructuring and Dissolution Act – Key Changes from the Financiers’ Perspective

This update describes some of the key changes introduced by the Insolvency, Restructuring and Dissolution Act (“IRDA”) that may be of interest to banks and other lending institutions, and analyses the potential benefits and implications of these changes on lenders’ rights and interests.

The Art of the Ad Hoc

Relevance of ad hoc committees in Singapore restructurings

An extract from the second edition of GRR’s The Art of the Ad Hoc, first published in December 2020. The whole publication is available at https://globalrestructuringreview.com/guide/the-art-of-the-ad-hoc/edition-2.