The message from turnaround and restructuring leaders, Carlyn Taylor (FTI, US), Chris Laverty (Grant Thornton UK LLP) and Cos Borrelli (Kroll, Asia Pacific) is that advisory roles in restructuring have remained surprisingly limited across various jurisdictions, despite significant economic headwinds. In some jurisdictions though, that may soon change.
US restructuring activity is picking up very slowly. Americans are experiencing the worst inflation in decades. However, the interest rate rises from the US Federal Reserve Bank point to a “soft landing” after the consequences of that inflation. This suggests the likelihood of a more drawn-out period of increased restructuring work over an 18 to 30 month period. Taking advantage of frothy capital markets, many borrowers appear to have taken up the opportunity of more favourable terms, locking in lower interest rates and extending maturity dates. Although some indicators suggest that those maturity dates may coincide with the end of that 18 to 30 month period. At present, restructuring activity remains below historical norms. There has been a slight increase in chapter 11 filing activity but they overall remain relatively few.
The UK economy is in a state of distress from a range of factors, most recently the issues flowing from the recent mini-budget. Other factors include difficulties associated with supply chains for raw materials, transport costs and liquidity pressure (amongst other factors). Consumer-impacted businesses, in particular, have suffered with falling sales and an inability to refinance existing debt. This is on top of the impact of Brexit and the COVID pandemic. Issues flowing from the war in the Ukraine (a session at the TMA conference on which Baker McKenzie is sponsoring tomorrow) have affected Europe and the UK, notably in the following industry sectors: construction, automotive parts, energy, telecommunications, food and beverage and manufacturing. The UK industry sectors most affected are construction, manufacturing, retail, care homes, real estate, hospitality and consumer led financial services. Mention was made of recent use of the UK Restructuring Plan process. For more on this you can read our alert on the process here.
In Singapore, restructuring opportunities have been relatively few. Companies in most distress have been in the cryto and e-commerce space. Singapore’s recent legislative process has been on the manner it introduced the model law and innovations in restructuring processes. For more on those processes you can read our alert here.
Hong Kong remains in a recession. Restructuring work in Hong Kong has been dominated by Chinese property developers which, in turn, has impacted on the local residential property and professional services sectors. The retail sector is featuring heavily with more restructures and liquidations than any other sector. On the upside, Hong Kong’s biggest development is the enactment of a reciprocal recognition scheme for insolvency proceedings between Hong Kong and China. For more information you can read our recent alert here.