With the general trend in so many jurisdictions being a notable lack of liquidity, Singapore is fortunate to be witnessing a gradual return of free capital. New lending is certainly nowhere near the levels witnessed before the credit crisis, but optimism is abundant and a number of notable acquisition finance deals point to the fact that banks are beginning to emerge from hibernation....
[more]
With the general trend in so many jurisdictions being a notable lack of liquidity, Singapore is fortunate to be witnessing a gradual return of free capital. New lending is certainly nowhere near the levels witnessed before the credit crisis, but optimism is abundant and a number of notable acquisition finance deals point to the fact that banks are beginning to emerge from hibernation.
However, restructuring and refinancing work remain the main driver for most practices as banks continue to put their houses in order following the shake-up of the last few years. Even with increased confidence and slight return of liquidity large institutions will be conscious of the need to maintain, and in most cases increase, their core capital base in line with new regulations and not to risk too much at this point on new ventures.
With the market on the up, foreign firms will hope to benefit. In January 2011 the government finally ratified the Foreign Practitioner Certificate (FPC), allowing foreign lawyers to sit the Singapore bar exams. Certainly this will further increase the scope of international firms on more domestic focused mandates and continue the gradual liberalisation of the market. However, some firms are not convinced that will lead to a dramatic change in the landscape. Domestic banks only account for a limited proportion of new lending in the market and a lot of these more localised mandates are already well served by the local firms. Indeed, it may prove to be an un-profitable venture for international firms to compete with domestic outfits for this work.
A more likely outcome is that it will simply allow international firms to offer more flexibility to their clients, reducing the need to call in additional counsel as and when more specific Singaporean elements arise on the larger cross border deals.
[Read about law firms' performance in this practice area]
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Arguably the biggest event in the Singapore capital markets space last year was the proposed merger between the Singapore Stock Exchange (SGX) and its Australian counterpart (ASX). With an agreement reached in October 2010 the $8.4 billion deal will see the combined operation become the second largest exchange in the Asia-Pacific region creating a $1.9 trillion market.
The details of the deal would see SGX bid for all shares in ASX through a scheme of arrangement creating a $1.9 trillion market and providing investors with access to 2700 listed companies. Both exchanges will retain their own names.
The merger is an attempt to bring together the strengths of each entity and create a credible competitor and an alternative to the Hong Kong Stock Exchange.
It certainly bodes well for firms, which will hope that a strong stream of new IPO mandates flows forth if the merger goes ahead. Indeed, the exchange already seems to have raised its profile when it was announced in August 2011 that Manchester United Football Club, which is owned by the Glazer family would be seeking to list the club on the exchange in an attempt to raise $1 billion in new capital. The deal had originally been planned for Hong Kong, however the exchanges' rules disallowed this on account of the Club's debts.
This news aside, the last year has remained relatively stable on the equity side with enough mandates to satisfy the big firms but arguably still not enough to support a deepening of the legal market.
Indonesia remains a focus, with work arising from investment linked to the country's natural resources and Singapore being the obvious destination for energy or mining company's to list. However the holy grail remains Chinese listings, with regulators desperate to tap into the immense potential represented by Chinese corporates. The issue of course is that such companies have a natural home on the Hong Kong exchange, therefore new strategies will need to be put in place to break those historical and geographical links and make Singapore a more favourable option.
On the debt side Islamic finance continues to represent an interesting source of work and the last year saw the largest ever sukuk (Islamic bond) done in Singapore issued by Khazanah Nasional Berhad at S$1.5 billion ($1.2 billion)
[Read about law firms' performance in this practice area]
[hide]
With the general trend in so many jurisdictions being a notable lack of liquidity, Singapore is fortunate to be witnessing a gradual return of free capital. New lending is certainly nowhere near the levels witnessed before the credit crisis, but optimism is abundant and a number of notable acquisition finance deals point to the fact that banks are beginning to emerge from hibernation....
[more]
With the general trend in so many jurisdictions being a notable lack of liquidity, Singapore is fortunate to be witnessing a gradual return of free capital. New lending is certainly nowhere near the levels witnessed before the credit crisis, but optimism is abundant and a number of notable acquisition finance deals point to the fact that banks are beginning to emerge from hibernation.
However, restructuring and refinancing work remain the main driver for most practices as banks continue to put their houses in order following the shake-up of the last few years. Even with increased confidence and slight return of liquidity large institutions will be conscious of the need to maintain, and in most cases increase, their core capital base in line with new regulations and not to risk too much at this point on new ventures.
With the market on the up, foreign firms will hope to benefit. In January 2011 the government finally ratified the Foreign Practitioner Certificate (FPC), allowing foreign lawyers to sit the Singapore bar exams. Certainly this will further increase the scope of international firms on more domestic focused mandates and continue the gradual liberalisation of the market.
However, some firms are not convinced that will lead to a dramatic change in the landscape. Domestic banks only account for a limited proportion of new lending in the market and a lot of these more localised mandates are already well served by the local firms. Indeed, it may prove to be an un-profitable venture for international firms to compete with domestic outfits for this work.
A more likely outcome is that it will simply allow international firms to offer more flexibility to their clients, reducing the need to call in additional counsel as and when more specific Singaporean elements arise on the larger cross border deals.
Arguably the biggest event in the Singapore capital markets space last year was the proposed merger between the Singapore Stock Exchange (SGX) and its Australian counterpart (ASX). With an agreement reached in October 2010 the $8.4 billion deal will see the combined operation become the second largest exchange in the Asia-Pacific region creating a $1.9 trillion market.
The details of the deal would see SGX bid for all shares in ASX through a scheme of arrangement creating a $1.9 trillion market and providing investors with access to 2700 listed companies. Both exchanges will retain their own names.
The merger is an attempt to bring together the strengths of each entity and create a credible competitor and an alternative to the Hong Kong Stock Exchange.
It certainly bodes well for firms, which will hope that a strong stream of new IPO mandates flows forth if the merger goes ahead. Indeed, the exchange already seems to have raised its profile when it was announced in August 2011 that Manchester United Football Club, which is owned by the Glazer family would be seeking to list the club on the exchange in an attempt to raise $1 billion in new capital. The deal had originally been planned for Hong Kong, however the exchanges' rules disallowed this on account of the Club's debts.
This news aside, the last year has remained relatively stable on the equity side with enough mandates to satisfy the big firms but arguably still not enough to support a deepening of the legal market.
Indonesia remains a focus, with work arising from investment linked to the country's natural resources and Singapore being the obvious destination for energy or mining company's to list. However the holy grail remains Chinese listings, with regulators desperate to tap into the immense potential represented by Chinese corporates. The issue of course is that such companies have a natural home on the Hong Kong exchange, therefore new strategies will need to be put in place to break those historical and geographical links and make Singapore a more favourable option.
On the debt side Islamic finance continues to represent an interesting source of work and the last year saw the largest ever sukuk (Islamic bond) done in Singapore issued by Khazanah Nasional Berhad at S$1.5 billion ($1.2 billion).
The country’s M&A market remains relatively healthy. Although work is not as buoyant as it was in 2009 heading into 2010, there remains a good pipeline particularly in core areas such as natural resources and energy.
In this last area, one of the year's largest deals saw investment vehicle Vallar acquire stakes in Bumi Resources and Berau Cola Energy for $3 billion. The Nathan Rothschild controlled company followed this with a $2.1 billion bid for Bumi Resources Minerals in a move to greatly increase its options and assets in Indonesia.
For most firms the bulk of their project finance practice remains linked to energy and natural resources projects. Singapore remains a hub in Southeast Asia for these types of projects due to its relatively advanced finance markets and the experience that its banks have in the area.
With the demand for infrastructure in many countries in the region still at a high level, Singapore also acts the regional point of reference, providing new projects with a localised template rather than having to look for examples out of Europe or America.
Despite this great demand there is still in some cases a reticence on behalf of certain banks to lend to projects, which fall outside their comfort zone. A certain level of conservatism still exists and many institutions are still only willing to lend to a tried and tested client base.
Export Credit Agencies (ECAs) continue to play a major role in financing and indeed can often have a secondary role providing confidence, through their presence on deals, to the local banks.
Interest in PPP's (public-private partnerships) continues apace and Singapore continues to be a trailblazer in the region for these types of deals.
Restructuring and insolvency work has not really touched the heights that people expected in the wake of the credit crunch. This is partly down to the fact that Singaporean banks were perhaps not as badly exposed to those deals and products that caused the most damage.
This is not to say that they were not effected and despite a slight pick-up, a relatively low level of liquidity points to the fact that many institutions still have issues of concern on their balance sheets and are simply playing an elongated game of extend and pretend.
This attitude is helped by the general atmosphere in the country, which encourages actions and procedures tilted towards rescue and recovery rather than those which could lead to insolvency.
However this approach has been tested at times when cases have gone as far as the courts. For example, in November 2010 DBS Bank had, for one of its debtors, stopped short of calling in a loan despite the company's repeated failure to repay the amount and had instead settled by taking a charge over shares. This was deemed by the court to be an unfair preference towards one creditor at the expense of others. While this does, as many would deem correct, encourage creditors to be treated equally, such decisions reduce the options available when trying to find an amiable solution, which may in turn lead to more protracted negotiations.
In general though both banks and companies are keen to avoid the courthouse and as a result firms have seen themselves called upon to act as negotiators.
[Read about law firms' performance in this practice area]
[hide]
The Singapore M&A market remains relatively healthy. Although work is not as buoyant as it was in 2009 heading into 2010, there remains a good pipeline particularly in core areas such as natural resources and energy....
[more]
The Singapore M&A market remains relatively healthy. Although work is not as buoyant as it was in 2009 heading into 2010, there remains a good pipeline particularly in core areas such as natural resources and energy.
In this last area, one of the year's largest deals saw investment vehicle Vallar acquire stakes in Bumi Resources and Berau Cola Energy for $3 billion. The Nathan Rothschild controlled company followed this with a $2.1 billion bid for Bumi Resources Minerals in a move to greatly increase its options and assets in Indonesia.
Practitioners also note the potential for Indonesian companies, particularly in the booming natural resources sector, to capitalise on the current high level of commodity prices, look at potential targets around Southeast Asia and establish themselves regionally as dominant players.
Another interesting development this year has been the final ratification of the Foreign Practitioner Certificate (FPC) in January 2011. As part of the ongoing attempts by the Singaporean government to liberalise the legal market, the new certificate will allow foreign lawyers to sit the Singaporean bar exams, allowing them to practice local law.
As in other practice areas, there is a feeling within the market that in the short-term at least this development will not drastically change the landscape within M&A. Domestic mandates will continue to be dominated by the large local firms, with international firms happy to admit that in most cases it would not be a profitable exercise to go up against them. Instead the real battleground will be on more regional cross-border mandates, where international firms with their stronger networks and local firms with their larger teams will go head to head.
[Read about law firms' performance in this practice area]
[hide]
For most firms the bulk of their project finance practice remains linked to energy and natural resources projects. Singapore remains a hub in Southeast Asia for these types of projects due to its relatively advanced finance markets and the experience that its banks have in the area.
With the demand for infrastructure in many countries in the region still at a high level, Singapore also acts the regional point of reference, providing new projects with a localised template rather than having to look for examples out of Europe or America.
Despite this great demand there is still in some cases a reticence on behalf of certain banks to lend to projects, which fall outside their comfort zone. A certain level of conservatism still exists and many institutions are still only willing to lend to a tried and tested client base.
Export Credit Agencies (ECAs) continue to play a major role in financing and indeed can often have a secondary role providing confidence, through their presence on deals, to the local banks.
Interest in PPP's (public-private partnerships) continues apace and Singapore continues to be a trailblazer in the region for these types of deals.
[Read about law firms' performance in this practice area]
[hide]
Restructuring and insolvency work has not really touched the heights that people expected in the wake of the credit crunch. This is partly down to the fact that Singaporean banks were perhaps not as badly exposed to those deals and products that caused the most damage.
This is not to say that they were not effected and despite a slight pick-up, a relatively low level of liquidity points to the fact that many institutions still have issues of concern on their balance sheets and are simply playing an elongated game of extend and pretend.
This attitude is helped by the general atmosphere in the country, which encourages actions and procedures tilted towards rescue and recovery rather than those which could lead to insolvency.
However this approach has been tested at times when cases have gone as far as the courts. For example, in November 2010 DBS Bank had, for one of its debtors, stopped short of calling in a loan despite the company's repeated failure to repay the amount and had instead settled by taking a charge over shares. This was deemed by the court to be an unfair preference towards one creditor at the expense of others. While this does, as many would deem correct, encourage creditors to be treated equally, such decisions reduce the options available when trying to find an amiable solution, which may in turn lead to more protracted negotiations.
In general though both banks and companies are keen to avoid the courthouse and as a result firms have seen themselves called upon to act as negotiators.
[Read about law firms' performance in this practice area]
[hide]