Insights – Key takeaways on rescue financing from SMU Law Academy webinar
An engaging and insightful discussion on “Recent Developments in Rescue Financing in Singapore: A Case Study Approach” at the SMU Law Academy webinar held on 15 July 2021.
DHC Capital Partner, David Chew participated on the webinar with Smitha Menon (Partner, WongPartnership LLP). The panel was moderated by Aurelio Gurrea Martinez (Asst Prof of Law, SMU Yong Pung How School of Law).
Key takeaways from the webinar:
Concept: The concept of super priority rescue financing was introduced in the Companies (Amendment) Act 2017, which came into effect on 23 May 2017 and was incorporated into the Insolvency, Restructuring and Dissolution Act 2018 (“IRDA”), which came into effect on 30 July 2020. The concept of super priority was adapted from the US Bankruptcy Court and was introduced to support debtor-led restructurings through a “turbo charged” scheme of arrangement regime
Four levels: Four levels of super priority under Section 67 of the IRDA ranging from being treated as part of the costs and expenses of the winding up (lowest level; Section 67(1)(a) IRDA) to secured by a security interest on property subject to an existing security interest, of the same priority as or higher priority than that existing security interest, known as “priming” (highest level, Section 67(1)(d) IRDA)
Creditor protection: Concept of adequate protection for existing security holders in priming situations. Equity cushion, being the amount by which the value of the collateral exceeds the debt owed to the creditor (i.e. the amount by which the creditor is oversecured) can be used to demonstrate adequate protection, but is subject to valuation debates between competing stakeholders
Track record and local infrastructure established: Legal regime largely in place and successfully proven in local cases (click here for further information on Swee Hong super priority deal, click here for further information on Asiatravel super priority deal and click here for Design Studio super priority deal). Local infrastructure in place with legal advisors, financial advisors, banks, investment funds and strategic investors on the ground
Role of the Court: Court taking a commercial and practical approach. Court shown a willingness to take guidance from precedent cases from the US Chapter 11 regime
Factors to create a more vibrant rescue financing market:
Better credits – better businesses, better quality assets and bigger sizes (new money quantum US$75 million +)
Companies taking pro-active steps to address debts at an earlier stage in the cycle
Active secondary debt trading market – high yield bonds, leveraged loan market and bank loans
Quicker processes for schemes – Faster hearings and dedicated restructuring bench
Special thanks to SMU Law Academy for hosting the webinar.
About SMU Law Academy
The SMU Law Academy (previously known as CLE) has an established track record of providing the legal profession with high quality seminars and other opportunities to remain fully informed about contemporary legal developments in Singapore and beyond.