Volatile credit markets and guarded banks have made securing term loan C (TLC) debt attractive for borrowers who heavily rely on letters of credit to trade but either have low credit ratings or otherwise have difficulty accessing large enough revolving facilities to support the high amount of letters of credit needed.

HEADLINES

We are pleased to announce the publication of the third edition of the Herbert Smith Freehills Guide to Restructuring, Turnaround and Insolvency, Asia Pacific.

Against a backdrop of the COVID-19 pandemic and the resulting economic downturn, we are seeing companies and lenders respond to a new and challenging business environment. The challenges associated with this new environment are further exacerbated as the influencing factors change in nature and intensity.

Six days into 2020, the Indonesian Constitutional Court (“Constitutional Court”) began the New Year with a bang, issuing a decision that is not likely to be received well in loan markets.

The Constitutional Court has decided in favour of two petitioners (a married couple) and effectively changed the interpretation of Article 15(2) and (3) of the Fiducia Law (Law No. 42 of 1999), striking at the core principles of that law (“Constitutional Court Decision”).

Introduction

Over the last few years, the European leveraged finance market has seen rapid growth of senior secured high yield notes (“SSN”) and senior secured covenant-lite term loan  B (“TLB”) financings. A common feature of both SSNs and TLBs (together “Senior Secured Debt”) is that their terms typically permit the incurrence of senior unsecured debt by a borrower and its restricted subsidiaries (a “Credit Group”) subject to either satisfaction of a  financial ratio or through various permitted debt baskets.