Rajah & Tann Singapore LLP, Southeast Asia’s largest law firm, reckons the region’s rising bond defaults will inflict as much pain on creditors as the financial crises of 2008 and 1998.
As distress spreads from shipping to mining and retail to construction industries, the law firm said in an interview that recovery rates will be similar to those seen in the global credit meltdown and Asian financial crisis. Secured creditors recover only less than 33 cents on the dollar from insolvencies in East and South Asia, compared with more than 80 cents in the US, according to World Bank studies. Rival law firm Hogan Lovells US LLP said in an interview that regional banks will likely boost the sale of bad loans in the coming months.
“The trough in the mining cycle seems to be continuing and some say it will be a while more before any significant recovery is expected,” said Sim Kwan Kiat, Rajah & Tann’s head of restructuring and insolvency based in Singapore. “From experience, the lower end of the spectrum for recovery rates this time round in 2016 is unlikely to be much different from those in 2008 or 1997-98.”
Bad loans in Singapore rose to a six-year high in 2015 and the city faces escalating risk on multiple fronts. Rating companies last month placed energy and mining companies globally on review for downgrades, the Baltic index of shipping rates last week reached the lowest since its 1985 inception and Singapore’s home sales had their worst start to the year since 2009 after prices slumped.
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As distress spreads from shipping to mining and retail to construction industries, the law firm said in an interview that recovery rates will be similar to those seen in the global credit meltdown and Asian financial crisis. Secured creditors recover only less than 33 cents on the dollar from insolvencies in East and South Asia, compared with more than 80 cents in the US, according to World Bank studies. Rival law firm Hogan Lovells US LLP said in an interview that regional banks will likely boost the sale of bad loans in the coming months.
“The trough in the mining cycle seems to be continuing and some say it will be a while more before any significant recovery is expected,” said Sim Kwan Kiat, Rajah & Tann’s head of restructuring and insolvency based in Singapore. “From experience, the lower end of the spectrum for recovery rates this time round in 2016 is unlikely to be much different from those in 2008 or 1997-98.”
Bad loans in Singapore rose to a six-year high in 2015 and the city faces escalating risk on multiple fronts. Rating companies last month placed energy and mining companies globally on review for downgrades, the Baltic index of shipping rates last week reached the lowest since its 1985 inception and Singapore’s home sales had their worst start to the year since 2009 after prices slumped.
Click Here To Register For Free Trial Services OR Give A Missed Call : +6531581402 Follow Us On Twitter : www.twitter.com/epicresearchsg Like Us On Facebook : www.facebook.com/EpicResearchSingapore Need Any Assistance Feel Free To Mail Us at : info@epicresearch.sg
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