White & Case LLP, the New York-based law firm with more than 60 lawyers in its three China offices, has allied itself with Hong Kong dispute resolution boutique Laracy Gall in readiness for a flood of corporate failures, Bloomberg reported.
"It's a perfect storm," John Hartley, head of White & Case's Asia bank finance and restructuring practice, said in an interview in Hong Kong. "There's a large amount of refinancing coming up, and capital is retreating with banks retracting lending and private equity and distressed opportunities funds facing redemptions."
Banks are curbing lending as shrinking earnings increase the risk companies will be unable to repay their debts. New loan agreements in Asia-Pacific excluding Japan dwindled to $4 billion this year from $32 billion in the same period a year earlier, data compiled by Bloomberg show. The global default rate on speculative-grade debt will peak at 16.4 percent in November, worse than in the Great Depression, according to Moody's Investors Service.
The tie-up will focus on insolvencies with a "center of gravity" in Hong Kong, including businesses from throughout Asia with holding companies in the city, according to Laracy Gall founder Nick Gall. The International Monetary Fund said last month that developing Asian economies will grow by 5.5 percent this year, the slowest pace since 1998, when the region was racked by its own financial crisis.
Corporate insolvencies started rising in Hong Kong last year after falling since 2003, according to the Official Receiver's Office. The situation is likely to worsen, with the city's central bank warning more than HK$100 billion ($12.9 billion) of syndicated loans will mature this year, risking defaults if companies are unable to refinance the debt.
...