Singapore seeks US Chapter 11 prowess in bankruptcy law reform

An office worker at Raffles Place, the heart of the central business district (CBD) on June 3, 2015.
An office worker at Raffles Place, the heart of the central business district (CBD) on June 3, 2015.PHOTO: ST FILE

SINGAPORE (BLOOMBERG) - Singapore is seeking to enhance its position as a centre for debt restructuring by giving its insolvency law some of the powers of the US bankruptcy code's Chapter 11, just as companies worldwide default on bonds at the fastest pace since the global financial crisis.

The Law Ministry has "broadly accepted" 17 recommendations submitted by a committee after a yearlong review, it said in a statement.

Those include offering automatic stay of legal and enforcement actions for debtors, creating a bench of specialist judges for its bankruptcy court and increasing rescue-financing capital by enticing distressed-debt funds and private equity firms to set up shop in the city-state.

There have been 100 bond defaults globally this year through July 15 compared with 62 failures at this time last year, according to S&P Global Ratings, the worst since the fallout from the demise of Lehman Brothers Holdings. In Singapore, non-payments by PT Trikomsel Oke and Pacific Andes Resources Development Ltd from November marked the first defaults since 2009.

"The recommendations are progressive," said Ashok Kumar, a director at BlackOak LLC, a restructuring and insolvency law firm in Singapore. "The market needs it as over the next couple of years, things are going to be rough in some sectors as the risk of debt default rises."

A Chapter 11 bankruptcy petition protects the debtor from legal and enforcement action worldwide. Singapore's Companies Act grants a similar enforcement suspension for judicial management applications.

A slump in global commodity prices in the past three years has pushed Asian coal miners including PT Bumi Resources and PT Berau Coal Energy to seek protection in Singapore and U.S. courts, while fishery group Pacific Andes Resources made a move locally.

Singapore's legal review may also introduce so-called pre- packaged restructuring - a negotiated deal between the debtor and its major creditors that may be presented for court approval before any formal legal proceedings. The intent is to save time and cost in debt restructuring efforts.