When it comes to matters legal or bureaucratic, Singapore is swift to act. Bankruptcy, sometimes, can be even faster.
Ezra Holdings Ltd., a Singapore publicly traded oil services group, and two of its affiliates, Ezra Marine Services Pte and EMAS IT Solutions Pte, filed for Chapter 11 protection over the weekend in a U.S. bankruptcy court in White Plains, New York. On Monday, shares in Nam Cheong Ltd., a builder of offshore support vessels, tumbled as much as 33 percent to a record low after the company on Friday said its auditors raised some financial concerns.
Ezra’s financial situation had been unraveling fast. Two vessel owners canceled their charter agreements with a subsidiary last week and invoices were piling up. Chapter 11, which halts all claims against a firm so it can continue to operate while it works out a deal with creditors, was a good solution. Pity Ezra couldn’t have waited a bit longer, because quite soon, similar protection will be available in Singapore, and perhaps will even come with some enhancements.
On March 10, Singapore’s government voted to enact several changes to its Companies Act that are expected to be brought into force in the second quarter. Among the measures is a new restructuring framework that will allow firms to ask local courts to stop claims from creditors, suppliers and lessors. Companies will also be able to borrow money for operational business purposes, with newer creditors ranking above existing ones as a way of stimulating lending during the bankruptcy process. That’s possible in the U.S. under debtor-in-possession rules, but was only available in Singapore in certain situations.
Biggest Ezra creditors without collateral: $607.6 million.
Perhaps more importantly for companies like Ezra, or other oil services firms with operations outside of the city-state, Singapore’s court decisions will now be extra-territorial. That means an order made by a court in Singapore will be applicable across the globe. So, for example, a shipping outfit with vessels around the world can continue operating in the knowledge that those assets can’t be easily seized while it’s in bankruptcy protection. Again, that’s been a feature of U.S. bankruptcy laws, which is why many international companies tend to go there for protection.
Bigger picture, the changes are part of Singapore’s plan to become the preferred center for debt workouts in Asia. And true to form, it’s been fast-tracked, with a committee of restructuring professionals only 12 months ago submitting a report that was used to help draft the amendments to the existing law.
Ezra missed out. But with defaults rising and distressed-debt levels spiraling, you can be sure there will still be plenty of takers.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.