The recent rise in Asian restructurings and insolvencies has led to a spike in demand for personnel who specialise in the legal and regulatory contexts that inform these activities. This is evidenced in a spate of headcount increases by international law firms in Hong Kong and Singapore.
Ashurst, on July 20, announced the appointment of Robert Child as a partner in its restructuring, insolvency and special situations practice in Singapore. Before that, the firm promoted partner Sophie Lyall in Hong Kong to bolster its restructuring team in Asia Pacific, it said.
Earlier this month, law firm Mayer Brown added eight lawyers to its corporate and securities division in response to the its Hong Kong-based international and Chinese clientele’s need for expertise in Hong Kong, English and New York law governed capital markets products.
“As a consequence of the prolonged lockdown and social distancing measures all around the world, we have seen more companies falling into payment default and breaching financial covenants of financing documents,” said Tiffany Wong, managing director at consulting firm Alvarez and Marsal’s restructuring practice in Hong Kong.
“This has called for a significant increase in demand for legal and financial services from obligors, lenders and investors,” Wong said.
A long, hard look
The immediate stress caused by the spread of the coronavirus prompted governments in the region to introduce various support measures, including subsidies and stimuli. Lenders too were encouraged to exercise forbearance and patience to give time for businesses to be restructured, Wong observed.
But that attitude is changing as, with the passage of time, both borrowers and creditors are realising they must take a pragmatic view of the long-term viability of companies. This shift in perception is among the factors driving the increased demand for professional services pertaining to restructurings and insolvencies, according to Wong.
Another reason behind the increase in opportunities in this area is the growing sophistication of financial markets in Asia, with homegrown companies expanding overseas. As a result, Asian companies are becoming more amenable to initiating restructuring processes and recognising the value of doing so in a timely fashion to give the firm a fighting chance.
Singapore has emerged as an important restructuring hub and is receiving heightened attention from international players in recent years, noted James Marshall, Asia Pacific head of restructuring, insolvency and special situations at Ashurst in the July announcement of Child’s joining.
Efforts by regulators in Asian financial powerhouses such as Singapore, which is transforming its regime to position itself as a nodal centre for bankruptcies and restructurings, means there is steady demand for restructuring and insolvency support in some Asian jurisdictions.
Political turbulence in nearby Hong Kong, which was roiled by protests in 2019 followed by the pandemic storm, could make Singapore a more attractive destination for businesses eyeing Asia or looking to move base from the special administrative region.
“We expect greater demand and involvement of credit markets and distressed players in the restructuring space,” wrote lawyers at Baker & McKenzie Wong & Leow in a note posted on the website of Singapore Management University’s Centre for Commercial Law in Asia on July 01.
“Challenging economic conditions, coupled with the acceleration of long-term structural trends such as digitalisation, mean that the demand for funding will remain strong. At the same time, liquidity continues to be abundant in Asia, driven by a potent combination of prolonged fiscal stimulus and uninspiring bond yields,” they said.
Regulatory surprises
On the other hand, uncertainty created by regulators’ actions will create employment avenues for those working across the risk management, M&A, bankruptcy and reorganisation spectrum. A recent case that highlights the impact of these variables is that of Chinese ride-hailing app Didi Global, said Wong.
After a blockbuster listing on the New York stock exchange on June 30, Didi’s shares plummeted 55% from IPO-highs, closing at $8.04 on Monday, July 26. Less than a week after its debut, news that China’s cybersecurity watchdog had launched a probe into the company and halted new user registrations for its services sent investors into a tizzy.
“I understand the recent regulatory changes in the US targeting Chinese issuers and the Didi saga in their US Listing have provoked a lot of thoughts and discussions about corporate governance, compliance, data security issues and more generally about financing options for Chinese companies in the future,” said Wong.
Endangered sectors
Apart from legal and regulatory forces, sectoral concerns in the wake of the pandemic are determining hiring trends for financial services in Asia.
The constraints imposed to stem the spread of the pandemic have left certain sectors particularly vulnerable. Transportation (airlines and cruise operators) and entertainment industries, where the physical presence of individuals is fundamental, are among the most severely affected.
“People are getting more accustomed to communicating virtually and technology companies which do not innovate and catch up with this trend will face challenges,” said Wong.
However, the worst of the pandemic’s fallout may now be past us. The major downside risks created by the disease should surface in the near-term if they haven’t already become apparent, Wong said.
“Those businesses which are sufficiently agile to be restructured will muddle through. I believe people and businesses in Asia will adapt to the changes more quickly than elsewhere in the world, so I am positive about the economic future beyond the initial 3-5 years after the pandemic,” she added.
