- No Va Land decision cements Singapore’s status as forward thinking, commercial jurisdiction for cross-border restructurings
- Lenders and financial sponsors structuring deals in the Southeast Asian market may consider Singapore as an alternative to Hong Kong for choice of law and forum
Over the Summer, the Singapore International Commercial Court (“SICC”) issued a landmark decision in In Re No Va Land Investment Group Corp [2024] SGHC(I) 17, authored by International Judge (and MoFo alum) James Michael Peck. This decision marks the first time the SICC has approved a cross-border, pre-packaged scheme of arrangement, setting a significant precedent for restructuring practices in Singapore.
Key Highlights of the Decision
The debtor, No Va Land Investment Group Corporation (“NVL”), was a Vietnamese real estate investment holding company with 93 corporate affiliates, making it one of Vietnam’s largest mid-market residential real estate developers. The company faced significant financial distress due to a downturn in Vietnam’s real estate sector, leading to a payment default on its US$300 million convertible bonds listed on the Singapore Exchange.
In a first-of-its-kind decision, the court found that NVL had substantial connections to Singapore, including the listing of its bonds on the Singapore Exchange and clauses requiring arbitration seated in Singapore. Additionally, the scheme itself contemplated voluntary submission to the jurisdiction of the SICC by both the applicant and the supporting bondholders. These factors collectively satisfied the requirement of a “substantial connection” to Singapore, enabling the SICC to exercise jurisdiction.
The court also found that NVL had fully satisfied the applicable statutory requirements under Section 71 of the Singapore Insolvency, Restructuring and Dissolution Act 2018, including making all applicable disclosures to the court, creditors, and other parties in interest, and complying with the other procedural safeguards designed to ensure due process of law.
The entire judicial process from case commencement to sanction of the scheme was completed in just 15 days, demonstrating the efficiency of Singapore’s pre-pack procedures. Under the scheme, the bondholders agreed to defer and capitalize certain unpaid interest amounts, as well as extend the maturity date of the bonds and modify other non-economic bondholder rights. The scheme received overwhelming support from bondholders, with 95.11% voting in favor, which the court noted further underscored that sanctioning the scheme was appropriate.
Lower Bar for Obtaining Jurisdiction in Singapore
The decision also highlights the relatively lower bar for establishing jurisdiction in Singapore for cross-border restructuring cases. The court found that NVL had substantial connections to Singapore based on the following factors:
- Singapore Exchange Listing: The company’s bonds were listed on the Singapore Exchange, providing a clear nexus to Singapore.
- Arbitration Clauses: Disputes relating to the bonds were subject to arbitration seated in Singapore, further establishing a connection.
- Voluntary Submission to Jurisdiction: The scheme itself contemplated voluntary submission to the jurisdiction of the SICC by both the applicant and the supporting bondholders.
These factors collectively satisfied the requirement of a “substantial connection” to Singapore, enabling the SICC to exercise jurisdiction.
Implications for Restructuring in Southeast Asia
This decision underscores Singapore’s viability as a destination for cross-border restructuring, offering an efficient and effective alternative to other jurisdictions, including Hong Kong (which certain market participants have shied away from in recent years). Lenders or sponsors structuring deals in the Southeast Asian market seeking a stable, commercially oriented, and independent forum for the resolution of disputes may consider negotiating ex ante for a Singapore choice of law and forum. In addition, the relatively low jurisdictional bar established by the decision means that stakeholders of a distressed business with a nexus to Southeast Asia may be able to take advantage of the relatively efficient and cost-effective pre-pack restructuring regime that Singapore offers.
Judge James Michael Peck, a former senior counsel at Morrison Foerster and bankruptcy judge in the Southern District of New York who presided over the Lehman Brothers bankruptcy, decided the case. His expertise and the court’s handling of the case provide a strong endorsement of Singapore’s legal framework for insolvency and restructuring.
Conclusion
The approval of the first cross-border pre-packaged scheme of arrangement by the SICC is a significant development in the field of international restructuring. Distressed companies, lenders, sponsors, and other stakeholders in Southeast Asia should consider Singapore as a potential jurisdiction for pursuing restructuring efforts, as it may offer a more stable and predictable process compared to other regional alternatives.
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