Singapore faces rising tide of bad debt with record corporate bonds maturing

  • Singapore firms are likely to see more soured debt as the trade-reliant economy takes a hit from US-China tensions.
  • That’s the view of debt restructuring experts, for whom more bad debt could mean increased business. Singapore’s government cut its forecast for economic growth 2019 to almost zero, and weak export data have stoked fears of a recession. The nation has already been rocked by the high-profile collapse of water treatment firm Hyflux Ltd.
  • “We could see a tide of distressed debt in Singapore,” said Shaun Langhorne, a restructuring lawyer and partner in Singapore at Hogan Lovells Lee & Lee. “A number of companies have significant amounts of debt.”
  • An increase in soured debt is likely to spell more pain for lenders and bond investors. Excluding banks, borrowers in the Singapore dollar bond market face a record SGD12bn of bonds maturing in 2020, according to Bloomberg-compiled data.
  • Repayment may be a challenge for some companies at a time when Singapore’s manufacturing sector contracted 3.1% in 2Q19 y/y, while the wholesale and retail trade sector shrank 3.2%.
  • Stress is likely to emerge in sectors such as logistics, in addition to others that have already been struggling, such as oil and gas and construction. More lenders and investors are “getting increasingly aggressive” in preparing for defaults and enforcing.

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