IFR International - 28.07.2018

h7EûDONTûHAVEûAûLOTûOFûFEMALESûINûLEADERSHIPûINûTHEû

lNANCEûSECTORv

NEW MACQUARIE CEO SHEMARA WIKRAMANAYAKE, P12

India promotes corporate bonds

)NDIASûMARKETûREGULATORûWANTSûLARGEû
COMPANIESûTOûMEETûATûLEASTûAûQUARTERûOFûTHEIRû
FUNDINGûREQUIREMENTSûINûTHEûBONDûMARKETû
FROMûTHEûNEXTûlSCALûYEAR
4HEûPROPOSALûFROMûTHEû3ECURITIESûANDû
%XCHANGEû"OARDûOFû)NDIA ûPUBLISHEDûONû*ULYû û
WOULDûAPPLYûTOûCOMPANIESûWITHûOUTSTANDINGû
LONG
TERMûBORROWINGSûOFû2SBNû53M ûORû
ABOVE ûAûCREDITûRATINGûOFû!!ûORûABOVE ûANDûPLANSû
TOûBORROWûFORûMOREûTHANûONEûYEARû4HEû
FRAMEWORKûWOULDûEXCLUDEûCOMMERCIALûBANKS û
ANDûEXTERNALûCOMMERCIALûBORROWINGûANDûINTER
CORPORATEûBORROWINGûBETWEENûPARENTû
COMPANIESûANDûTHEIRûSUBSIDIARIESûWOULDûNOTû
COUNTûTOWARDSûTHEûRATIO
-ARKETûPARTICIPANTSûSAIDûTHEûPROPOSALSûAREû
AûSTEPûINûTHEûRIGHTûDIRECTIONûATûAûTIMEûWHENû
BANKSûAREûRELUCTANTûnûORûUNABLEûnûTOûLENDû

GIVENûTHEûLEVELûOFûBADûLOANSûINû)NDIA

h4HEûPRESSUREûONûTHEûBANKSûWILLûREDUCEû

ANDûTHEûCORPORATEûBONDûMARKETûWILLûDEEPENû

FURTHERvûSAIDû+ILLOLû0ANDYAûHEADûOFûlXEDû

INCOMEûATû%SSELû&INANCEû!-#

)Nû)NDIAûTHEREûHASûTRADITIONALLYûBEENûAû

HIGHûRELIANCEûONûTHEûBANKINGûSYSTEMûTOûRAISEû

FUNDSûBECAUSEûTHEûLOANûMARKETûHASûTENDEDûTOû

BEûCHEAPERûANDûDEEPERû(OWEVERûhTHEûPUSHû

TOWARDSûTHEûBONDûMARKETûWILLûINCREASEûTHEû

VOLUMEûOFûQUALITYûPAPERûREDUCEûTHEû

CONCENTRATIONûONûBANKûBALANCEûSHEETSûANDû

INSTILûCREDITûDISCIPLINEûAMONGûBORROWERSvû

#AREû2ATINGSûSAIDûINûAûNOTE

)MPLEMENTINGûTHEûPROPOSALûCOULDûBEûTRICKYû

SOûTHEûMARKETûREGULATORûISûTAKINGûGRADUALû

STEPSûh3EBIûISûONLYûPROPOSINGûTHATûGOODûRATEDû

CORPORATESûTHATûHAVEûEASYûACCESSûTOûTHEûBONDû

MARKETSûADHEREûTOûTHEûMANDATORYûûLIMITvû

SAIDû2AJEEVû2ADHAKRISHNANûHEADûOFûlXEDû

INCOMEûATû3")û&UNDSû-ANAGEMENT

3EBIûHASûPROPOSEDûAûCOMPLIANCEûMECHANISMû

THATûWOULDûBEûIMPLEMENTEDûINûPHASESûTOû

SMOOTHûTHEûTRANSITIONûBECAUSEû)NDIAûISûINûAû

RISINGûINTERESTûRATEûCYCLEûANDûISSUERSûWILLûWARMû

TOûTHEûIDEAûONLYûGRADUALLYûSAIDû2ADHAKRISHNAN

4HEûSHAREûOFûCORPORATEûBONDSûASûAû

PERCENTAGEûOFû'$0ûINCREASEDûDRAMATICALLYûINû

"RAZILû2USSIAû#HINAûANDûTHEû5+ûINûTHEûlVEû

YEARSûFOLLOWINGûTHEûIMPLEMENTATIONûOFû

BANKRUPTCYûREFORMSûINûTHOSEûCOUNTRIESû3EBIû

WROTEû4HEûREGULATORûESTIMATEDûTHATûTHEûSHAREû

OFûBONDSûASûAûPERCENTAGEûOFû'$0ûWILLûINCREASEû

FROMûûCURRENTLYûTOûnûBYûnûFORû

)NDIAûDUEûTOûTHEûBANKRUPTCYûREFORM

Krishna Merchant

India’s bad debts draw early bets

)NDIASûRECENTLYûREVISEDûBANKRUPTCYûREGIMEûISû
OPENINGûUPûNEWûlNANCINGûOPPORTUNITIESûFORû
FOREIGNûBANKS ûALTHOUGHûONLYûAûFEWûAREûREADYû
TOûJUMPûINûWHILEûTHEûSYSTEMûISûBEINGûTESTED
!MONGûTHESEûEARLYûMOVERS ûNOMURAûANDû
DEUTSCHE BANKûSAYûTHEYûAREûREADYûTOûCOMMITû
SIGNIlCANTûTIMEûANDûCAPITALûTOûTHEûDISTRESSEDû
DEBTûMARKET
h)NDIAûISûAMONGûTHEûVERYûFEWûCOUNTRIESûINû
!SIAûOUTSIDEûOFûDEVELOPEDûMARKETSûWHEREûTHEREû
ISûANûINSOLVENCYûRESOLUTIONûFRAMEWORKûNOWûANDû
THISûHELPSûUSûLOOKûATûDISTRESSEDûDEBTûINVESTINGûINû
AûVERYûDIFFERENTûWAYûASûOPPORTUNITIESûEMERGE vû
SAIDû2AHULû'UPTA ûHEADûOFûILLIQUIDûCREDITûTRADINGû
FORû!SIAûEX
APANûATû.OMURA
4HEûCOUNTRYûINTRODUCEDûAûNEW ûLESSûDEBTOR
FRIENDLYûINSOLVENCYûANDûBANKRUPTCYûCODEûINû
û4HEN ûLASTûSUMMER ûTHEû2ESERVEû"ANKûOFû
)NDIAûFORCEDûLENDERSûTOûBEGINûINSOLVENCYû
PROCEEDINGSûAGAINSTûAûDOZENûMAJORûDEFAULTERSû
INûTHEû.ATIONALû#OMPANYû,AWû4RIBUNAL û
PROVIDINGûTHEûlRSTûTESTûOFûRECOVERYûRATESûUNDERû
THEûNEWûREGIMEû)TûHASûSINCEûADDEDûûMOREû
COMPANIESûTOûTHATûLISTûINûAûBIDûTOûFORCEûLENDERS û
ESPECIALLYû)NDIANûSTATE
OWNEDûBANKS ûTOûDEALû
WITHûNON
PERFORMINGûASSETS
$ESCRIBINGûTHEûTWINûDEVELOPMENTSûASû
hGAME
CHANGINGûFORû)NDIAv û!ADITû
3ESHASAYEE ûHEADûOFû.OMURASûSPECIALû
SITUATIONSûGROUPûFORû!SIAûEX
APAN ûSAYSûAû
QUARTERûORûMOREûOFûHISûGROUPSûPORTFOLIOûISû
LIKELYûTOûCOMEûFROMû)NDIAûINûTHEûNEXTû
û
MONTHSûh7EûCOULDûHAVEûANûEXPOSUREûOFû
CLOSEûTOûAûFEWûHUNDREDûMILLIONûDOLLARSûINûTHEû
NEXTûCOUPLEûOFûYEARSûCOMPAREDûTOûAûSMALLû
BOOKûSIZEûCURRENTLY vûHEûSAID
$EUTSCHEû"ANKûISûALSOûBULLISH ûSAYINGûTHEû

NEWû)"#ûREGIMEûHASûCREATEDûOPPORTUNITIESûTOû

hBEûACTIVEûINûALLûKINDSûOFûlNANCINGû

OPPORTUNITIESvûACCORDINGûTOû!MITû+HATTARû

CO

HEADûOFûGLOBALûCREDITûTRADINGûFORû!SIA

0ACIlCûh7EûAREûWORKINGûONûlVEûTOûSIXûDEALSû

INûTHEûDISTRESSEDûSPACEûRIGHTûNOWv

”THAT SCARES PEOPLE”

4HEûBANKRUPTCYûREGIMEûGIVESûCREDITORSûAû

QUICKERûWAYûOFûRESOLVINGûTHEIRûCLAIMSûANDû

COMESûASûTHEû2")ûISûPUSHINGûBANKSûTOûCLEANûUPû

ANûESTIMATEDû53BNûOFûTROUBLEDûLOANS

$EUTSCHESû+HATTARûSAIDûTHEûMOVESûREPRESENTû

hAûMASSIVEûCHANGEûINûWAYûPEOPLEûTHINKûOFû

BUSINESSESvû4HEûCONTROLLINGûSHAREHOLDERSûOFû

DELINQUENTûDEBTORûCOMPANIESûCANûNOûLONGERû

STONEWALLûFORûYEARSûINûTHEûCOURTSûASûTHEYûUSEDûTO

h.OWûTHATûREGIMEûISûGOINGûAWAYûANDûTHATû

SCARESûPEOPLEûANDûTHATûISûAûBIGûPOSITIVEvû

+HATTARûSAID

)NTERNATIONALûINVESTORSûSUCHûASûPRIVATEû

EQUITYûlRMSûDISTRESSEDûDEBTûFUNDSûANDû

HEDGEûFUNDSûAREûALLûSTUDYINGûTHEûMARKETûBUTû

CAPITALûCOMMITMENTSûHAVEûSOûFARûBEENûRARE

&OREIGNûBANKSûSEEûlNANCINGûOPPORTUNITIESûINû

THREEûDIFFERENTûAREASû4HEûlRSTûISûHELPINGû

COMPANIESûAVERTûDEFAULTûANDûAVOIDûAû

BANKRUPTCYûPROCESSû3ECONDûDURINGûTHEû.#,4û

PROCESSûWHICHûTYPICALLYûTAKESûSIXûMONTHSûTOû

ONEûYEARûISûTOûPROVIDEûWORKINGûCAPITALûTOûTHEû

STRESSEDûCOMPANYûTOûKEEPûTHEûLIGHTSûONû4HEû

THIRDûOPPORTUNITYûISûWHENûTHEûBANKRUPTCYû

COURTSûSELLûTHEûASSETSûANDûTHEûBUYERSûNEEDû

lNANCINGûFROMûCAPITALûMARKETSûANDûBANKSû

4RADINGûDISTRESSEDûDEBTûISûANOTHERûPOSSIBLEûPLAY

"ANKSûMAYûACTûONûTHEIRûOWNûORûTEAMûUPû

WITHûPARTNERSûACCORDINGûTOûTHEûSITUATION

h$EPENDINGûONûTHEûSIZEûOFûTHEûDEALûINû

QUESTIONûWEûCANûEITHERûDOûITûBYûOURSELVESûORû

WORKûINûPARTNERSHIPûWITHûAûNUMBERûOFûOURûHEDGEû

FUNDûCLIENTSvûSAIDû3ESHASAYEEûATû.OMURA

7HILEûTHEûFOCUSûSOûFARûHASûBEENûONûTHEû

RESOLUTIONûOFûSOMEûOFûTHEûLARGERûSTRESSEDû

CASESûhTHEûNEXTûROUNDûOFûOPPORTUNITIESûISû

EXPECTEDûTOûCOMEûFROMûAûDIVERSEûGROUPûOFû

COMPANIESûANDûFROMûACROSSûAûWIDEûRANGEûOFû

SECTORSvûSAIDû.OMURASû'UPTAûh7EûAREû

TAKINGûAûLONG

TERMûVIEWv

.OMURAûISûINûACTIVEûNEGOTIATIONSûONûAûCOUPLEû

OFûSITUATIONSûINûTHEûPOWERûANDûREALûESTATEû

SECTORSûWHILEû$EUTSCHEûISûINûTHEûPROCESSûOFû

CLOSINGûLARGEûDEALSûINûTHEûLASTûPHASEûOFû.#,4û

ACCORDINGûTOûTHEIRûRESPECTIVEûEXECUTIVES

)NEVITABLYûTHEREûAREûCHALLENGESûALONGSIDEû

THEûOPPORTUNITIES

h4HEûNUMBERûOFûSTRESSEDûASSETSûENTERINGû

THEûBANKRUPTCYûCOURTSûISûHUGEûHOWEVERûTHEû

COURTSûHAVEûLIMITEDûCAPACITYûANDûTHEûPROCESSû

ISûSTILLûEVOLVINGvûSAIDû$EUTSCHESû+HATTAR

2ECOVERIESûINûINITIALûRESOLUTIONSûHAVEûALSOû

BEENûDELAYEDûBECAUSEûOFûLITIGATIONûINûEFFECTû

LOWERINGûTHEûREALISEDûINTERNALûRATEûOFûRETURNSû

FORûINVESTORSû.OMURASû'UPTAûSAID

"ANKERSûAREûALSOûAWAITINGûCLARITYûAROUNDû

INTERPRETATIONûOFûSECTIONû!ûOFû)"#ûWHICHû

PREVENTSûRELATEDûPARTIESûFROMûBIDDINGûFORûTHEû

STRESSEDûASSETS

)NVESTORSûWHOûLACKûEXPERIENCEûINû)NDIAûAREû

LIKELYûTOûWAITûTOûSEEûSUCCESSFULûRESOLUTIONSû

BEFOREûDIPPINGûTHEIRûTOESûINûTHEûMARKETûh!CCESSû

TOûINFORMATIONûTOûCONDUCTûDUEûDILIGENCEûISû

ANOTHERûKEYûISSUEû&ORûEXAMPLEûSEVERALûBANKSû

MAINTAINûPHYSICALûDATAûROOMSvûSAIDû'UPTA

Krishna Merchant