The Acquisition And Leveraged Loan Market In Southeast Asia And India: Trends In 2019 And Market Outlook For 2020

Introduction

2019 was a busy year for the acquisition and leveraged loan market in Southeast Asia and India. In this article we look back at some of the key market and documentation trends last year and consider whether these trends will continue in 2020.

We welcome any feedback you may have on any of the trends set out in this article, as well as any other market or documentation trends across the region.

This article is intended to set out a high level overview of the market based on our own deal flow and from speaking to market participants.

Jurisdictional Overview

Vietnam was one of the standout jurisdictions in 2019. We witnessed an increased market appetite and interest in acquisition and leveraged loans and other structured lending solutions relating to Vietnam and acted on significant acquisition and structured lending mandates.

While transaction structures and terms for both on-shore and offshore financings relating to assets in Vietnam continue to be relatively complex and require significant legal and structuring input, market participants are becoming familiar with the structures used and the legal risks associated with them. One of the trends we noticed is that offshore lenders appear to be increasingly comfortable with structures designed to take security over Vietnamese borrowers' immovable property rights. Under Vietnamese law offshore lenders are not able to directly take a mortgage over immovable property of Vietnamese companies, subject to certain exceptions such as financing BOT projects. In the past, most offshore lenders would take share mortgages to indirectly capture the residual proceeds of real estate and immovable property assets. We are now seeing a prevalence of more creative structures which include letters of credit issued by local banks that are collateralised by a local company's real estate assets, and involving local banks as co-lenders on transactions. While these structures remain untested before the Vietnamese courts, the willingness to employ more novel structures speaks to the strong position of the Vietnamese market and increased risk appetite.

In addition to significant activity in Vietnam, markets such as India, Indonesia, Singapore and Malaysia continued to provide opportunities and deal flow for the regional acquisition and leveraged loan market in 2019.

The Indian offshore acquisition and leveraged loan market continued to see offshore holdco acquisition and margin loans relating to private...