Singapore investors stuck as bond restructuring drags on

Mr Keith Kueh was expecting Pacific Andes Resources Development to pay back the company's bonds last year so he could finance his son's university bill and his own retirement. Now it is 18 months after the Singapore-listed fishing company did not honour some obligations and he has not got his money yet.

"For investors like myself, we are not portfolio managers who are managing other people's money," said Mr Kueh, a founder at a tech start-up. "This is our hard-earned money."

Singapore is ranked the second-most competitive economy globally by the World Economic Forum, and is actually faster than most other countries in resolving insolvencies involving assets of all kinds, according to the World Bank.

But when it comes to the nation's bond market in particular, resolutions have been slower than in some other major markets, according to restructuring advisers.

The speed of such cases is a key focus for investors after the nation suffered an unprecedented $1.35 billion of local note defaults since November 2015. The Government introduced new restructuring laws this year, and the Monetary Authority of Singapore (MAS) has taken steps to spur bond ratings to help investors make informed decisions.

Debt restructuring is likely to take longer in Singapore than in the United States, Europe or the Asia-Pacific US dollar security market, and the fragmented bond holder base dominated by retail investors often makes the process more difficult, according to PwC Singapore.

Local note defaults are also less attractive for distressed funds which could help speed up the procedure, as it is difficult to reach a consensus among bond holders.

"The lack of specialists participating in Singapore defaults means that resolution will often take time and get dragged out," said Mr Peter Greaves, restructuring leader at PwC Singapore, which is advising offshore oil services group Ezra Holdings on its US bankruptcy proceedings.

The authorities have taken steps to increase investor awareness of risks in the market and to make it easier to restructure debt at home.

The MAS will start offering grants to offset costs incurred by issuers seeking credit ratings for Singapore dollar-denominated bonds, according to a central bank statement on June 30.

Greater availability of ratings in the domestic bond market would improve market transparency, it said. New debt restructuring-related amendments in the Companies Act went into force in May.

"Singapore now has a hybrid regime that incorporates the best features of the world's leading jurisdictions, including features that encourage participation by distressed debt investors," the Ministry of Law said in response to questions about bond restructurings. "The ministry will continue to monitor the impact that these reforms have on debt restructurings."

Before those changes, Pacific Andes filed last year in the US for protection against action by creditors. Court-supervised managers for Swiber Holdings this month sought an extension to send creditors a statement of proposals. Ezra Holdings said this month that none of its discussions with lenders and investors have yielded a definitive offer and it needs more time. The company in March filed for bankruptcy protection in the US.

Singapore takes nine months on average for resolving insolvency issues, compared with one year in Britain and Australia, and 11/2 years in the US, according to World Bank data. The figures look at the number of years from the filing for insolvency in court until the resolution of distressed assets.


A version of this article appeared in the print edition of The Straits Times on July 26, 2017, with the headline 'Singapore investors stuck as bond restructuring drags on'. Print Edition | Subscribe