OPES CAPITAL INC: Loan to own strategies as viable restructuring tools - 1 views
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igone ulmer on 12 Dec 12OPES CAPITAL INC Australian banks have historically relied on formal liquidation, voluntary administration and receivership processes available under the under the Corporations Act 2001 (Cth) and under general law where informal restructurings have failed. There has been little appetite for exploring alternative methods to exit distressed situations by debt trading. Until recently, an immature secondary debt market and general unwillingness to see potential upside returns flow to distressed investors exacerbated the reluctance of lenders to exit distressed situations by trading out of risk positions. Australian banks now view trading out of distressed loans as a viable option, often assessed at the outset of an informal restructuring and used as a benchmark indicator for assessing other exit strategies. There are a number of reasons for this shift in focus including: * an increase in impaired loans and liquidity contraction following the global financial crisis; * the emergence of special situation funds in the local market; * Australia being seen as a safe-harbour (both economically and politically) for capital investment; * revised capital adequacy requirements following the introduction of Basel II (now further enhanced through Basel III); and * banks' frustration at the sometimes protracted nature and cost of formal insolvency appointments. There has been renewed focus on the methods to capture enhanced equity values that flow from a successful restructure. Traditionally limited by the formulaic process required to be undertaken by receivers and external administrators, the market is now beginning to see more creative solutions aimed at delivering successful loan to own implementation strategies. This article considers how an appropriately structured formal external administration process combined with a debt trade may satisfy an external administrator's duties whilst delivering equity control to a distressed investor through strategies more commonly s -
igone ulmer on 12 Dec 12Wow, I love your post today! This in just the perfect time. Thanks a bunch!
