The Stressed Asset Resolution announced in India’s 2021-22 Union Budget proposed the establishment of a novel twin structure to clean up bank balance sheets in India. In this dual structure, the primary company, the National Asset Reconstruction Company Limited (“NARCL”), is a public sector asset reconstruction company mandated to acquire and aggregate non-performing assets (“NPAs”) (i.e. the ‘bad bank’). The second company is a private sector asset management company established to focus on the management and resolution of the NPAs held by NARCL, the India Debt Resolution Company Limited (“IDRCL”). Two years on, it is fair to say that the aggregation and resolution of NPAs by the bad bank in the Indian banking sector have fallen short of initial expectations.Continue Reading India’s bad bank, two years on…

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At a glance

A large number of legacy non-performing loan exposures (NPLs) continue to subsist on the balance sheets of banks. Portfolios of NPLs tie up huge amounts of regulatory capital which, in turn, limits the amount of capital that banks have available to lend to the real economy. The economic

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The appetite for ethical finance shows no sign of slowing. But as the interest in Environmental, Social and Governance (ESG) finances rises, so too do concerns about impact- and green-washing: the practice of making false or misleading claims about apparent ethical credentials.

Naturally, as an embryonic sector, many complex questions about ESG investment remain unexplored. Institutions are thus actively navigating this constantly evolving landscape in order to develop a financial ecosystem where investments are, as the governor of the Bank of England, Mark Carney, put it, “both financially rewarding and environmentally sustainable”.
Continue Reading Shaping a sustainable financial ecosystem: how to integrate ESG factors

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A federal district court in New York is currently hearing a case to determine if syndicated term loans are securities under US federal and state Blue Sky securities laws. The case (Marc S. Kirschner v. J.P. Morgan Chase Bank, N.A.) came about when borrowers, Millennium Health, LLC and certain of its affiliates (“Millennium”), in a widely syndicated loan went into bankruptcy. The bankruptcy trustee (the “Trustee”) to certain trusts formed as part of the bankruptcy restructuring brought suit against the lending syndicate, including J.P. Morgan Chase Bank (“J.P Morgan”), as one of the lead arrangers alleging the lenders misrepresented the information provided to the trust’s beneficiaries (as represented by the Trustee) to determine if they wanted to participate in the Millennium syndicate. The Trustee asserts that J.P. Morgan sold its participation of a loan to Millennium which they were aware was having substantial economic and legal difficulty.
Continue Reading You Say Loan Participation, I Say Securities, Let’s Call the Whole Thing Off

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The recent news that the Greek parliament has approved the Greek government guarantee programme Hercules marks an important milestone in the evolution of the European non-performing loan (NPL) securitisation market. If Hercules enjoys the same level of success that we have witnessed the Italian GACS deliver, then this will have widespread, positive ramifications for not only yield-hungry investors but also the handful of systematic Greek banks that have balance sheets saddled with large volumes of NPLs.
Continue Reading Hercules – an astronomical boost for NPL securitisation

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In a push to tackle Greek’s bad debt exposure, the Greek Parliament has approved a new asset purchase scheme nicknamed ‘Hercules’. The scheme aims to assist Greek banks deleverage their non-performing loans (NPLs) without the need for the government to step in with subsidies.

Under the scheme, banks will sell non-performing loans to a special purpose vehicle, which will use proceeds from the issuance of tranched notes to market investors to purchase the loans. The Greek government will provide a public guarantee for the senior notes in the securitisation vehicle at a market rate.
Continue Reading Greek’s bad debt exposure – Hercules to the rescue!

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The provision of indemnities, particularly those provided to corporate trustees and agents, is an important feature of an effectively functioning structured finance market.  It enables the parties involved to allocate the risks of unforeseen expenditure to those parties with the ultimate economic interest in the transaction and allows trustees and agents to keep their fees at a reasonable level.

Whilst the need for indemnities is generally accepted, the terms on which they are provided can be an area of robust negotiation.
Continue Reading Indemnities – beware the consequences of “reasonableness”

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This week saw the High Court clash between the swap provider, UBS, and the recently appointed replacement note trustee (Glas Trust Corporation) on the embattled Fairhold Securitisation.  The dispute at hand centres on whether or not the ad hoc noteholders group’s fees and expenses (comprising the fees of its financial adviser and lawyers) can be recovered from the waterfall, effectively subordinating payments to the swap providers and noteholders.  The financial adviser’s fees were reported to be in excess of £3.75m.
Continue Reading Fairhold Securitisation – can noteholders claim advisers’ fees through the trustee?

Picture this: it’s 1793. In England, George III is on the throne and the Bank of England issues the first ever ‘fiver’.  In the U.S.A, George Washington hosts the first US cabinet meeting as President and the capital moves from Philadelphia to Washington, D.C.  In France, the French Revolution is in full swing with King Louis XVI guillotined, and France becomes the first country to adopt the metric system.

And in Ireland, the Irish Stock Exchange is founded. Though of course, that is not to say that there weren’t other important things happening in Ireland at the time as well….
Continue Reading With-Hold on a second?! New ISE rule leads to automatic de-listing of debt securities at scheduled maturity

With yet another foreign convertible bond default hitting our desk, we cannot help but wonder what the future has in store for Asian convertible bonds and debt capital markets restructurings.  This is particularly relevant when you consider that Indian companies and banks issued foreign currency bonds aggregating up to approximately $6.3 billion in the first quarter of 2013.  This momentum continued throughout 2013 with Indian companies expected to raise another $10 billion by the beginning of 2014 by issuing foreign currency bonds in the international capital markets.

The Story so far

The convertible bond has always been a favourite of corporate India.  Turning back the clock, one would recall that, particularly between 2005 and 2008, several companies across multiple industries used a variety of structures to access the international debt capital markets by issuing foreign currency convertible bonds (FCCBs) to investors. Such issuers included National Thermal Power Corporation, Indian Oil Corporation, Bharat Petroleum Corporation, Power Finance Corporation, Tata Steel, Tata Communications, Vedanta, Bharti Airtel, Amtek Auto and Rural Electrification Corporation (just a few names amongst an endless list of issuers back in the day).

Fast forward to 2014 and FCCB defaults have dominated recent headlines (think major companies like Sterling Biotech, KSL and Industries and Suzlon Energy).
Continue Reading Indian Bond Defaults and Bond Restructurings: More Scheming Ahead?