Singapore Lawyers Warn of 1998-Like Pain as Debt Defaults Spread
Rajah & Tann Singapore LLP, Southeast Asia’s largest law firm, reckons the region’s rising bond defaults will inflict as much pain on creditors as the financial crises of 2008 and 1998.
As distress spreads from shipping to mining and retail to construction industries, the law firm said in an interview that recovery rates will be similar to those seen in the global credit meltdown and Asian financial crisis. Secured creditors recover only less than 33 cents on the dollar from insolvencies in East and South Asia, compared with more than 80 cents in the U.S., according to World Bank studies. Rival law firm Hogan Lovells US LLP said in an interview that regional banks will likely boost sales of bad loans in coming months.
“The trough in the mining cycle seems to be continuing and some say it will be a while more before any significant recovery is expected,” said Sim Kwan Kiat, Rajah & Tann’s head of restructuring and insolvency based in Singapore. “From experience, the lower end of the spectrum for recovery rates this time round in 2016 is unlikely to be much different from those in 2008 or 1997-98.”
The potential of these dislocations to derail the UK’s economic recovery has not been lost on our policymakers. The Bank of England’s Monetary Policy Committee has comprehensively surrendered the idea of finally raising interest rates: its one member who had been voting in favour joined the more pessimistic majority earlier this month. The Chancellor, meanwhile, has been at pains in recent speeches to warn of the “cocktail of risks” facing the British economy. There seems little doubt, in other words, that the sudden acceleration of uncertainty on global financial markets is serious. But why is it happening – and what does it mean?
Earlier this week, Baghdad extended an offer to pay the salaries of the KRG’s public employees in return for a halting of unilateral oil exports by the Kurds. Both sides need this deal. The KRG is struggling to pay salaries, and protests are mounting—threatening the stability of what was not long ago the only peaceful and secure place in all of Iraq.
Overall, imports by states in the Middle East increased by 61%; imports by European states decreased by 41% over the same period. Britain sold more weapons to Saudi Arabia than to any other country. Saudi Arabia is also the biggest US arms market and buys more American arms than British, the report shows.
Panic Below The Surface:
"Banks Are Selling Energy Loans At Cents On The Dollar
One week ago, when we commented on the latest weekly update from Credit Suisse's very well hooked-in energy analyst James Wicklund, one particular phrase stuck out when looking at the upcoming contraction of Oil and Gas liquidity: "while your borrowing base might be upheld, there will be minimum liquidity requirements before capital can be accessed. It is hitting the OFS sector as well. As one banker put it, "we are looking to save ourselves now."
