Singapore aims to be debt restructuring hub joining New York and London

Singapore Supreme Court Singapore Supreme Court

Singapore is seeking to become a debt restructuring centre alongside New York and London with changes to its Scheme of Arrangement system to make it closer to US Chapter 11 filings.

Analysing the changes to Singapore’s bankruptcy restructuring rules law firm Stephenson Harwood (Singapore) Alliance reviewed the proposals in the context of the marine and offshore sectors.

“The Singapore government is seeking to make Singapore a debt restructuring centre akin to London and New York. The aim is to replicate the success it has had in making Singapore an international financial and arbitration centre,” the law firm said.

The move to a more Chapter 11 modeled system comes at time when Singapore offshore firms are facing major financial restructurings, and some such as Ezra Holdings sought protection in the US rather than locally.

“The enhancements to the Singapore restructuring regime are important in the context of, according to Bloomberg, the SGD38bn of Singapore bonds that corporates must repay by 2020,” the note said.

Stephenson Harwood highlighted six key changes to the Singapore rules.

1 – A 30-day automatic moratorium that can be extended worldwide and to related entities.

2 – Pre-pack arrangements.

3 - Super-priority rescue financing and super-priority liens.

4 – Cross-class cram down.

5 - Rules governing how a foreign company can take advantage of the Singapore scheme of arrangement

6 – Adopting the UNCITRAL Model Law on Cross-Border Insolvency

“Anyone familiar with Chapter 11 proceedings will quickly note that the changes highlighted above bear significant resemblance to certain aspects of Chapter 11 proceedings,” the law firm said. It described it as a hybrid restructuring scheme adopting elements of both the English scheme of arrangement, on which the Singapore scheme was previously modeled, and US Chapter 11.

The new rules will make it easier for non-Singapore companies to seek Singapore debt restructuring, and represent a shift to looking at restructurings from an international perspective.

“The enhancements to the restructuring regime in Singapore have made Singapore an attractive third option to London and New York, especially for corporates in the Asia-Pacific region,” Stephenson Harwood stated.

The example of Ezra Holding’s March 2017 Chapter 11 filing in the US, the more recent Singapore filings by subsidiary EMAS were highlighted. “It would be interesting to know if Ezra Holdings would have been less inclined to opt for Chapter 11 had the enhanced Singapore scheme of arrangement been available. The application by EMAS Offshore, dated 31 August 2017, for a moratorium under the enhanced Singapore scheme of arrangement regime is perhaps the first indicator that the tides are turning.”

Time will tell if the enhanced scheme proves to be popular with companies for debt restructuring, however Stephenson Harwood is positive. “It is too early to tell if Singapore will be successful in creating a regional restructuring centre but the enhanced regime has created a lot of excitement in the restructuring world and has generally been received positive initial feedback,” the firm said.

The full briefing note by Stephenson Harwood can be read here

Posted 09 October 2017

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Marcus Hand

Editor, Seatrade Maritime News