22 International Financing Review March 21 2020SRB CHAIR ELKE KOENIG ON BANCO POPULAR, P15“This decision now closes the process of analysing whether
insolvency would have meant a better outcome”
China sets up fifth national AMC
China has given the go-ahead for a new
national asset management company to deal
WITHûDISTRESSEDûDEBT ûTHEûlRSTûSUCHûMOVEûINû
more than two decades.
Jiantou Citic Asset Management will be
transformed and renamed CHINA GALAXY ASSET
MANAGEMENT, according to a statement from
the China Banking and Insurance
Regulatory Commission.Central Huijin Investment, a wholly
owned subsidiary of sovereign wealth fund
China Investment Corporation, is the
majority shareholder in Jiantou Citic with
70%, while Citic Securities owns 30%.
Jiantou Citic’s transition will occur within
six months from the regulator’s approval,
which was given on March 5.
China set up four national AMCs – ChinaGreat Wall Asset Management, China Orient
Asset Management, China Huarong Asset
Management and China Cinda Asset
Management – in 1999 to deal with the
pile-up of bad loans following the Asian
lNANCIALûCRISIS
According to PwC, non-performing loans
and stressed assets in China’s banking
SYSTEMûTOTALûAROUNDû53TRNû4HATûlGUREûISû
expected to rise given the economic impact
of the coronavirus outbreak.
Thomas BlottYes Bank resumes operations
YES BANK resumed operations last week, less
than two weeks after India’s central bank
seized control of the beleaguered lender.
Yes Bank resumed operations at 6pm on
Wednesday after the Reserve Bank of India
signed off on a Rs100bn (US$1.34bn) rescue
plan led by STATE BANK OF INDIA on March 13.
India’s largest bank by assets has acquired a
48.2% stake in Yes Bank after injecting
Rs60.5bn in capital. HOUSING DEVELOPMENT
FINANCE CORP (8%), ICICI BANK (8%), AXIS BANK (4.8%),KOTAK MAHINDRA BANK (4%), FEDERAL BANK (2.4%),
BANDHAN BANK (2.4%) and IDFC BANK (2%) have also
agreed to invest a combined Rs39.5bn.
SBI must maintain a stake of at least 26%
for the next three years, while the others
must keep at least three-quarters of their
stakes for the same period.
4HEûRESTRUCTURINGûOFû)NDIASûlFTHûLARGESTû
private sector bank is a major test for the
COUNTRYSûlNANCIALûSYSTEMû)NûTHEûPAST û.EWû
Delhi has tended to lean on the country’sstate-owned lenders to acquire private sector
BANKSûTHATûRUNûINTOûDIFlCULTIESûRATHERûTHANû
restructurings.
India is already grappling with the
world’s worst bad loan ratio for a large
economy (surpassing Italy last year for
that dubious honour), slowing economic
growth, the fallout of a liquidity crunch
in the non-banking sector after the
default of Infrastructure Leasing &
Financial Services in September 2018,
and now the economic impact of the
coronavirus.
Thomas BlottRestructuring shops gear up for impending wave
US restructuring shops are all swinging into
high gear as the coronavirus pandemic up-
ends global economies and threatens
companies previously thought of as solid – as
well as those already on the brink of collapse.
“It’s energy, obviously, anything related to
travel/ gathering or their suppliers, leisure,
it’s airlines and suppliers, aircraft and parts
manufacturers,” said the head of one
restructuring group.
Even as US legislators negotiate a potential
bailout package of some industries – possibly
including aerospace, airlines and energy –
restructuring shops are expected to help
companies navigate a complicated process.
An initial relief package proposed up to
US$50bn for airlines, US$8bn for cargo air
carriers, and US$150bn for other severely
distressed businesses.
But the bailout will come with strings
attached that would be likely to impair
shareholders, and could also impact
creditors. The initial proposal notes that the
government has the right to participate in
the gains of any business it lends to. In
previous bailout schemes that has meant
massive dilution for shareholders.SPIKE COMING?
2ESTRUCTURINGûlRMSûWEREûACTIVEûEVENûINûAû
low-default environment, but are gearing upFORûAûSIGNIlCANTûSPIKEûINûTHEûDEFAULTûRATEûASû
the economy contracts.
-OSTûOFûTHEûlRMSûAREûSETûUPûASû
independent M&A investment banks, with a
component of restructuring advisory –
Lazard, PJT, Evercore, Moelis and Greenhill.
The groups are designed to complement one
another, with M&A bankers capable of
pitching in during spikes in restructuring.
The impact is expected to impact earnings
INûTHEûlRSTûQUARTER ûPROVIDINGûAûBOOSTûASû
M&A activity slumps.
h%NERGYû-!ûBANKERSûWEREûTHEûlRSTûTOû
migrate across the wall,” said one
restructuring banker. The energy sector was
upended as oil prices sank amid a price war
between Saudi Arabia and Russia.
A slew of energy companies have
exhibited signs of distress, including
Whiting Petroleum, Antero Resources,
California Resources, Gulfport Energy and
Chesapeake Energy, with each company
examining options.
Natural gas explorer and producer
Gulfport Energy hired Perella Weinberg
Partners to help it potentially restructure,
while Chesapeake Energy has hired
Rothschild as it wrestles with its US$8.92bn
debt load and declining revenues.
The default rate is starting to tick up. The
global corporate default tally for 2020 jumpedto 26 last week, according to S&P Global
2ATINGS ûAFTERûlVEûCOMPANIESûDEFAULTED û
including New Jersey-based apparel retailer
Ascena Retail Group and Connecticut-based
Frontier Communications.
By region, the US leads with 18 defaults,
followed by Europe with four. By sector,
CONSUMERûPRODUCTSûLEADSûWITHûlVEûDEFAULTS û
followed by retail and restaurants with four
defaults.
Retail and restaurants are expected to be
particularly hard hit in the next wave, as
efforts to contain the virus eliminate their
respective customer bases.
Distressed exchanges are the leading
reason for defaults in 2020 so far with nine
defaults, followed by bankruptcy-related
defaults and missed payments with eight
each.
Restructuring bankers have generally
advised clients to draw down all available
liquidity, recalling the freeze-up in credit
DURINGûTHEûnûlNANCIALûCRISISû3OûFAR û
however, there have not been any signs that
banks are clamping down or attempting to
withdraw lines.
The next big test will be how willing they
are to make debtor-in-possession loans as
companies seek bankruptcy protection, one
banker said.
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