HONG KONG • Singapore firms are likely to see more soured debt as the trade-reliant economy takes a hit from United States-China tensions.
That is the view of debt restructuring experts, for whom more bad debt could mean increased business. The Singapore Government cut its forecast for economic growth this year to almost zero, and weak export data has stoked fears of a recession. The nation has already been rocked by the high-profile collapse of water treatment firm Hyflux.
"We could see a tide of distressed debt in Singapore," said Mr Shaun Langhorne, a restructuring lawyer and partner in Singapore at Hogan Lovells Lee & Lee. "A number of companies have significant amounts of debt."
An increase in soured debt is likely to spell more pain for lenders and bond investors. Excluding banks, borrowers in the Singapore dollar bond market face a record $12 billion of bonds maturing next year, according to Bloomberg-compiled data.
Repayment may be a challenge for some firms at a time when Singapore's manufacturing sector contracted 3.1 per cent in the second quarter from the previous year, while the wholesale and retail trade sector shrank 3.2 per cent.
Prime Minister Lee Hsien Loong said this month that there is no need yet for economic stimulus, but the Government will "promptly respond" if the situation worsens. To be sure, some economic indicators recently have been brighter. The contraction in Singapore's electronics production eased dramatically last month, for example.
Ms Angela Ee, a Singapore-based partner at EY with over two decades of restructuring experience, said stress is likely to emerge in sectors such as logistics, in addition to others that have already been struggling, such as oil and gas and construction. Given the weakness of the economy, "more defaults" in the local currency bond market are likely, she said.
KrisEnergy, a Singapore-listed oil and gas explorer that is partly held by Keppel Corp and had sought to restructure its debt in 2016, said last week that it will "temporarily cease repayment" on some of its financial obligations.
This includes interest payable under its $200 million bond due in 2023. Singapore hard-drive component maker MMI International last month missed repayments on a US$580 million (S$805 million) loan.
According to Mr Danny Ong, a partner at law firm Rajah & Tann Singapore, more lenders and investors are "getting increasingly aggressive" in preparing for defaults and enforcing.
KrisEnergy last week said it received a letter from HSBC Holdings for "acceleration" of their term facility agreement. Meanwhile, Singapore-listed Triyards Holdings said last month that its subsidiary was ordered by Singapore's High Court to be wound up.
"We expect to see more distress in Singapore and the larger Asian region," said Mr Ong.