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Singapore’s proposed Chapter 11 law reform is ‘positive’ for offshore: AlixPartners

Singapore’s proposed Chapter 11 law reform is ‘positive’ for offshore: AlixPartners
A proposed Chapter 11-like bankruptcy code for Singapore would bode well for the debt restructuring market, especially at a time when offshore companies are struggling to stay afloat under mounting debts, according to AlixPartners UK.

Singapore has mooted the idea of giving its insolvency law some of the powers of the US bankruptcy code’s Chapter 11, protecting the debtor from legal and enforcement action.

“This movement in Singapore is quite positive not just for the country but for the region as well, and we may see more restructurings take place on the basis of that,” Albert Stein, managing director of AlixPartners UK, told delegates at the Singapore Offshore Finance Forum held in Singapore on Thursday.

Stein believed that the proposed change in Singapore’s insolvency law would “create different dynamics on what creditors can expect along the process and make the restructuring process more fluid.”

He added that the European market used to frown upon Chapter 11 but they have realised now that the process is fair and would allow creditors to get back a fair share of their debts.

The crash of oil prices have triggered the recession in the offshore oil and gas sector, which is already drowning in excess capacity. Several Singapore-listed offshore services companies are struggling with bond defaults and losses. Offshore services firm Swiber has gone bankrupt while Ezra Holdings is facing similar threats as some of its creditors have filed for claims.

Stein believed that more restructurings may happen in the Asian offshore market over this year and even into 2018. “We are going to get to the point where banks in Asia are going to be less forgiving,” he said.

Sven de Veij, managing director, head of oil & gas services, NIBC Bank, said lenders have played a part in creating the problems of today as they have allowed too much liquidity to flow into the market, fuelling a high number of newbuilds such as rigs and OSVs.

“Over time, banks themselves have to take more impairments on their loan books as the market continues with the downturn,” de Veij said.

He noted that some cases of restructuring are heading in the right direction but some companies are simply kicking the can down the road. “By 2020 if market activity levels remained low, we will be faced with another round of restructurings,” de Veij warned.

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