Roll-up Rescue Financing – A New Tool for Banks to Salvage Non-performing Loans

30 Jun 2020 LegisWatch

“Old (money) - may become senior (priority)”

In a recent landmark decision, the Singapore High Court approved a US$62 million rescue financing package to the Design Studio Group Ltd and five of its subsidiaries which incorporated a “roll-up” of a bank lender’s pre-existing debt.

WongPartnership LLP represented the bank lender, Hongkong and Shanghai Banking Corporation, in the successful application.

A “roll-up” is a feature of a rescue financing deal which upgrades the priority of a rescue lender’s pre-existing debt into a super-priority debt. This is achieved by applying a portion of the rescue financing proceeds towards paying the pre-existing debt of the rescue lender. The pre-existing debt is, in effect, converted (or “rolled-up”) into the super-priority rescue financing debt.

The High Court’s decision signals the growing sophistication of Singapore’s debt restructuring regime. It also marks the emergence of “roll-up” rescue financing as a new way for banks and finance companies to salvage non-performing loans (“NPLs”). By upgrading the priority of pre-existing debts, a “roll-up” allows a lender to increase the potential upside on the recovery of its pre-existing debts. This offers a strong commercial incentive for lenders to extend rescue financing to aid the successful rehabilitation of financially troubled companies in their NPL portfolios.

If you would like information or assistance on the above or any other area of law, you may wish to contact the Partner at WongPartnership whom you normally work with or any of the following Partners:

Smitha MENON
Partner – Restructuring & Insolvency
d +65 6416 8129
Click here to view Smitha's CV.

Alvin CHIA
Partner – Banking & Finance
d +65 6416 8214
Click here to view Alvin's CV.