(a) If a corporate debtor is in financial difficulty, is there an attitude of 'concealment' or 'denial' toward the admission or exposure of that financial difficulty?

 

Yes.

(b) If so, is the reason for this based on cultural or other factors?

 

Based on the cultural factor, e.g., the owner being not willing to face the reality that the company is poorly managed and thus become insolvent, or the owner being lack of the concept to abide law.

(c) Is it likely that a corporate debtor would:

(i) volunteer the fact of its financial difficulty to a lender or group of lenders; or

(ii) admit or concede it only if and when confronted by a lender or group of lenders?

 

It is likely that a corporate borrower would admit its financial problems only if and when confronted by a lender or group of lenders.

(d) If a corporate debtor is in financial difficulty, is it likely that the corporate debtor would:

(i) do nothing;

(ii) seek expert assistance and advice; or

(iii) accept the appointment by a lender of an outside expert/advisor?

 

It is likely that the corporate debtor would do nothing until such problem is revealed to the public or the creditors discover such problem. The corporate debtor will neither seek expert assistance and advice nor accept the appointment by a lender of an outside expert/advisor until such problem is revealed or the creditors discover such problem.

(e) If it was agreed between a lender and a corporate debtor that an expert/advisor would be appointed, is it likely that a corporate debtor would give the expert/advisor unrestricted access to all relevant financial and other information regarding the corporate debtor?

 

Generally, yes.

(f) In that situation, is it likely that the financial and other information regarding the corporate borrower would be:

(i) complete; and

(ii) accurate (particularly regarding the valuation of assets and the assessment of liabilities)?

 

Yes.

(a) Is it more common that the financial difficulty of a corporate borrower will be:

(i) volunteered by a corporate debtor; or

(ii) discovered by a lender (and, if so, how)?

 

It is more common that the financial difficulty of a corporate borrower will be discovered by a lender. A lender always discovers this from the clearing house that the debtor is unable to honor its checks.

(b) If a lender becomes aware that a corporate debtor is in financial difficulty, is it likely that the lender would seek to investigate the financial crisis of the corporate debtor itself and employ an expert/advisor to investigate the financial position?

 

It is our observation that in most of the cases, the lender will carry out the investigation by itself.

(c) If so, is the expert/advisor likely to be:

(i) an independent professional; or

(ii) an 'in-house' employee of the lender?

 

In case of investigations made by the lender itself, the employees of the lender will be assigned to conduct the investigation.

(d) Is it likely that information regarding the financial position of a corporate borrower as discovered from the work of an expert/advisor would be:

(i) kept secret from other lender/s or creditors;

(ii) disclosed to other/selected lenders?

 

Before the financial difficulty has been known by all of its creditors, the creditor who has discovered such fact is likely to keep secret from other lenders in order to satisfy its own rights of claim. The appointment of expert/advisor is generally approved by all creditors, and in such event, the information found out by such expert/advisor will be shared by all creditors.

(e) If there were 2 or more lenders (not in a syndicate) involved with the same corporate borrower, is it likely that they would:

(i) join together to share information and endeavour to work out a common approach to the financial problems of the corporate borrower; or

(ii) act secretly and independently of one another?

 

Please refer to our answer (d) above.

(f) If there was a group of lenders (whether in a syndicate or not) involved with the same corporate borrower, is it likely that one of them would offer or seek to be the leader on behalf of them all?

 

It depends on the actual situations.

(g) If so, is it likely that such a proposal would be agreed to by the other lenders?

 

Please refer to (f) above.

(h) Is it likely that local lenders would have employees who are experienced in informal work outs?

 

Yes.

(i) If there was foreign bank lending involved, is it likely that domestic lenders would:

(i) combine with; or

(ii) act independently of the foreign lender/s?

 

It depends on the actual situations.

(j) Is it likely that 'junior' or 'minor' lenders might seek to trade their debt?

 

Seldom.