ATTA Chairman, Russell Brown, Managing Partner of LehmanBrown, welcomed everyone to the Conference.  Russell informed members and guests of progress in ATTA's reciprocal membership agreement with the Institute for Turnaround in Europe.

Day One – Friday 17 June 2016

We kicked off with a discussion on Trends in Intra-regional FDI in Southeast Asia. First, we noted that net inflow of FDI into Thailand from Japan is continuing at an average of USD+400m per month. John Marsden of Mayer Brown JSM has observed corporations from Korea, Japan, Singapore and Taiwan increasing their footprint in Vietnam. With a relatively low cost of labour and GDP growth at 6.5%, Vietnam remains an attractive alternative for manufacturers. The ratio of smaller projects is rising and Vietnam now ranks fifth in APAC in greenfield FDI projects. John Marsden shared his experience on the USD1.8bn restructuring of the Vietnamese shipbuilding conglomerate, Vinashin. There are major restructuring opportunities in ports, NPLs and SOEs.

Tom Vaizey of Dragon Capital Group, which has USD1.4bn in assets under management in Vietnam, alerted us to the country’s burgeoning middle class and rise in domestic consumption. He also pointed out that Vietnam is likely to be a chief beneficiary of the forthcoming Trans-Pacific Partnership.

Audray Souche of DFDL has been legal advisor on a number of significant energy and project financings in Cambodia and Laos, where labour rates are 65% lower than in Thailand. Skill levels in these countries are just as low and Thai FDI strategy has encouraged firms operating in Thailand to relocate low value-add manual processing to new industrial areas along its borders within Cambodia and Laos. Simultaneous with our conference, the first-ever CLMVT Forum was bringing together government and private sector representatives from Cambodia, Laos, Myanmar, Vietnam, and Thailand to discuss regional synergies in attracting FDI.

Next, we addressed Enforcement of Collateral Security for Turnarounds: law and practice in Thailand, India and China. Janet Geddes of Muirfield Consultants, reviewed India’s first national bankruptcy law, which was passed on 11 May 2016. The Insolvency and Bankruptcy Code requires the corporate insolvency process to be completed -either restructuring or liquidation- within 180 days, with only one 90-day extension permitted.

Janet Geddes also noted significant deterioration in asset quality for banks in India. In May, the Reserve Bank of India estimated bad and doubtful debt at USD131bn, which is around 14% of the total exposure across India’s top 50 banks. At present, the World Bank estimates that the debt recovery rate in India is only 25%. It can take more than four years to resolve insolvencies – assuming they can get into the system in the first place – ranking India 136 out of 189 jurisdictions. The new bill created a new class of insolvency professional and a new ombudsman: the Insolvency and Bankruptcy Board of India. Optimism among restructuring and turnaround specialists, such as Apollo Global and Alvarez & Marsal, is evidenced by their upcoming recruitment plans in India.

James Rix of Mayer Brown JSM introduced Thailand's new Business Collateral Act which has the overall objective of boosting Thailand’s economic growth.  It provides business operators, and in particular SMEs, which make up the majority of Thai businesses, greater access to sources of investment.  The Act introduces new types of assets which can now be given by a borrower as security, as well as setting out a new centralised regime of security registration under a new office to be established under the auspices of the Department of Business Development of the Ministry of Commerce.  Of particular importance to borrowers, the provision of security under the Act allows a borrower to retain possession of the security; in the past such security had to be physically delivered to the lender to create a valid pledge which often adversely impacted on the borrower’s ability to continue carrying on its business.  The Act also overhauls the legal mechanisms by which lenders can commence enforcement procedures against collateralised assets.  Whilst the Act was to come into force on 1 July 2016, ministerial regulations were yet to be issued in order to implement key aspects of the Act such as details of the registration procedures and the eligibility criteria of security providers, issues which may impact on the practicality of taking security under the Act.

Dr. Jason Corbett of Silk Legal spoke on China’s reform of movables as transaction security. The collateral registry maintained by PBOC and CRC reached 1.7 million transactions at the end of 2015, representing USD 2.5 tn in loan financing backed by receivables and leases. At USD600bn, China has shrunk back below 25% of the world market. However the average of 83 payable days is the longest since the 1999 economic slowdown. Policy lending has pushed corporate debt to a high of 145% of GDP despite corporate borrowers’ declining ability to service the debt. The IMF estimates that USD 1.3 tn, or 15.5% of total corporate bank borrowing, is at risk. One of the main challenges is the completion of insolvency proceedings to restructuring or liquidation – a weakness with serious repercussions on supply chains and labour unrest.

Day Two – Saturday 18 June 2016

We gained an insightful and entertaining look into Mediation: an effective tool for resolving disputes. Professor Andrew Goodman of1 Chancery Lane spoke about this equitable method of solving problems to the benefit of both parties. This method is particularly advantageous when parties need to preserve normal business relations, publicity would hurt their interests, litigation would be slow, punitively expensive and possibly unenforceable, and where the relative merits of their rights are unclear. The outcome of successful mediation is typically a comprehensive and readily enforceable new agreement between parties, normalising stakeholder partnerships and enabling uninterrupted business relations.

Khun Nattinee Netraumpai of Thailand Arbitration Center (THAC) explained how Thailand, where the government sees mediation as an efficient way to help free up congested courtrooms, has supported THAC to launch the first online dispute resolution portal for customers and online retailers: www.talkdd.com.

Andrew Goodman and Nattinee Netraumpai emphasized the importance of mediation skills in the toolkit of a restructuring turnaround professional and offered ATTA members access to their mediation training programs. THAC will be running an internationally recognised course on “The Essential Skills And Knowledge to Conflict Resolution” in Bangkok 22-28 September, with discounted rates available to ATTA members. Mr. Goodman also offered to run a 5-day program exclusively for ATTA members on 21-25 November leading to accredited mediator status. A full programme and details of costs will be circulated to members shortly.

Our finale was a panel discussion on Myanmar: The role of transformation and turnaround expertise within reconstruction and development, moderated by Dinesh Ahluwalia of Morning Harbour Investment Advisors. When asked to name the number one issue facing business in the country, the panel was unanimous: “There is a human resources hunger”.  Ankur Pandey of DKSH Myanmar shared how critical continuous talent development and retention are in the distribution sector. 

Paul Nikitopoulos of Myanmar Access who runs a recycler, MM Interplast, said that Myanmar needs people who will come and stay for a few years: “Don’t train us, come and work with us.” With the relaxation of U.S. sanctions, the talent shortage can only worsen. Josephine Price of Anthem Asia has invested in several nascent service and media sectors in which the latest technology and practice has been used from the start, serving the prosperous middle class and leap-frogging the existing infrastructure. In Myanmar, expatriates can add much value through their know-how transfer. 

Gary Biesty of South Asia Law confirmed that there is a strong foreign investment pipeline in health care, FMCG manufacturing, tourism and resource processing, however project approval can be protracted, so “hurry up and wait!” is to be expected. The panel agreed that the main opportunity for T&T experts is in transforming greenfield opportunities into sustainable enterprises. Unclear collateral rules notwithstanding, established businesses under the control of the “old guard” are unlikely to be serious about radical turnaround even in the face of competition.

We will develop these dialogues at our Annual Conference in Hong Kong, 11-12 November 2016, where we will addres IFRS9, the incoming accounting standard which pressures banks to acknowledge the workout costs of impaired assets. We will also further explore how “Frontier Asia” is transforming the regional manufacturing footprint.

ATTA Director, James Greener, thanked our speakers, panelists and delegates all for their rich contributions to a successful conference.  He closed the meeting with a summary of initiatives ATTA is undertaking in opening new chapters across Asia, launching a corporate membership scheme, and localising IFT's continuous professional development curriculum and qualifications for ATTA members.

The Conference Dinner was held at Medinii, our boutique hotel's 35^th floor skyline restaurant affording a view over Bangkok's evening cityscape. Delegates and speakers were able to get to know each other whilst enjoying the excellent food and beverages served by Continent Hotel.