Experts weigh in on Asia-Pac restructuring and insolvency rise

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The number of financial restructuring and insolvencies is on the rise in the Asia Pacific region and, despite low interest rates helping to cushion borrowers, depressed commodity prices have taken the number of global corporate defaults to their highest levels since 2008.

For lawyers, an increase in work with respect to distressed situations is only likely to continue, Herbert Smith Freehills partner Paul Apáthy told Australasian Lawyer.

“The general feedback from clients in the region is that the issues are yet to peak,” he said.

“There is however a general feeling that the scale of the issues in many cases will require parties to grapple with underlying issues of debt sustainability sooner or later given the 'new normal'.”

Apáthy said the conditions present both challenges and opportunities for the sector as a whole. But a depth of understanding of the relevant business sectors across the region is paramount to client service.

“Firms and lawyers will need to be flexible to adapt to these changing conditions and be able to provide the skills and solutions their clients need,” he said.

“There is the opportunity to help work through some of the most complex and important issues facing countries, businesses and lenders across the region.

“Firms with strength in Indonesia, China and Korea are well placed to respond to current issues, but we expect the situation to evolve and clients will need true regional capability.”

To assist their clients, Herbert Smith Freehills is launching a guide to navigating restructuring and insolvency legislation across 14 major jurisdictions in the Asia Pacific region today. The Restructuring, Turnaround and Insolvency in Asia Pacific Legal Guide focusses on practical issues and deals with the complexity of insolvency and restructuring laws when operating across borders.

“The region has also become more integrated and it is common for restructurings and insolvencies to cross jurisdictional boundaries, requiring a significant amount of expertise and co-ordination,” said global finance head, John Nestel.

“The legal frameworks for restructurings and insolvencies have been continuing to develop across the region, and in a number of countries these laws have been subject to major overhauls.”

The firm expects to see a greater emphasis on debt trading, loan portfolio trades and structured solutions as markets adapt to slower conditions.