Insights – Key takeaways on Rescue Financing from 5th Annual Insolvency Summit 2020
An engaging and insightful panel discussion on “Rescue Financing” at the Legal Era-Legal Media Group’s 5th Annual Insolvency Summit 2020 held on 21 October 2020.
DHC Capital Partner, David Chew participated on a panel discussion with panel members Ashwin Bishnoi (Partner, Khaitan & Co), Amitabh D’Souza (Director, AlixPartners) and Nitin Jain (Partner, EY). The panel was moderated by Smitha Menon (Partner, WongPartnership LLP).
Key takeaways from the panel discussion:
Rescue financing landscape in Singapore and South East Asia:
Debtor led rescues for companies facing liquidity pressures before COVID-19 and where COVID-19 accelerated the timeline. Primarily in shipping, construction and oil and gas sectors. Rescue involved identifying a white knight investor to inject new funds on the back of a restructuring (usually a scheme of arrangement). If liquidity position is tight, companies applied to Court for a moratorium and where required, DIP financing, to get breathing space from creditors and put together a restructuring plan with management staying in control
Direct COVID-19 related situations. Secondary debt opportunities as banks seek to exit problem loans and increasing appetite from companies for private capital / alternative capital for tailored financing solutions
Rescue financing landscape in Australia: Driven primarily out of formal insolvency (usually the Voluntary Administration process) in sectors hard hit by COVID-19 (such as retail and aviation). Examples include Virgin Australia (Bain Capital), Seafolly (L Catterton) and Kikki.K (US strategic buyer)
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
Assess management team and ability to execute business plan
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
Special thanks to Legal Era-Legal Media Group for hosting the virtual event.
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