☀️ Bright Spot #10
Asia’s Returning Bond Tide | India’s Self-Correction | Closing Southeast Asia’s Loopholes
I had an internal debate on whether I should publish the latest Bright Spot given the Hong Kong fires and floods across Asia in recent weeks.
But I think when bad news far outnumbers the good, positive developments are all the more precious and worth acknowledging.
Here are the bright spots to round up the year – with some caveats.
🌊 Asia’s Returning Bond Tide
A major theme in Asia is the returning bond tide after a multi-year drought caused by China’s property implosion. Offshore bonds are back as a funding option, which should be welcome by borrowers who were starved of liquidity.
I wrote in October that the musical chairs have restarted with banks, bondholders and private credit funds swapping seats with each other. But the set-up and player dynamics have changed:
Asian high-yield is more diversified as China’s property sector is estimated to account for only 7% of the market now, down from 38% five years ago.
Offshore bondholders are more wary about holding the bag for banks after several high-profile defaults.
In short, the music is back on but it isn’t the same old game anymore.
⏪ India’s Self-Correction
I asked two restructuring friends at a recent event: “If a court overturns a ruling that overturned another ruling, is that back to square one?”
On 2 May, India’s Supreme Court scrapped JSW Steel’s acquisition of Bhushan Power & Steel around four years after the deal was finalized under the Insolvency and Bankruptcy Code (IBC). Then three judges led by the Chief Justice decided on 26 September to reverse the earlier ruling and uphold the validity of the acquisition.
The process seemed like a U-turn that may have diverted time and resources, but a third friend noted that India managed to sort it out in the end. This is a fair point, as the legal system has shown the capacity to correct itself and preserve the IBC as an imperfect but functioning insolvency framework.
➰ Closing Southeast Asia’s Loopholes
Jurisdiction-shopping or court arbitrage has long been a method of some borrowers to avoid paying up.
I wrote in October that creditors typically pick Singapore as the venue for dispute resolution or schemes of arrangement, but lenders often hit the same wall if the key assets are in jurisdictions that are seen to favour the borrowers.
It will take time for legal systems to change, but the move by ASEAN Chief Justices to launch a regional model framework for cross-border insolvency was a step in the right direction.
