Examining Corporate Debt Restructuring Schemes In Pacific Asia - Free Essay Example

Sample details Pages: 4 Words: 1244 Downloads: 2 Date added: 2017/06/26 Category Finance Essay Type Analytical essay Did you like this example? Corporate debt restructuring scheme is one of the most preferred strategic for those financial distress companies to take advantage at a lower interest rate. It is a consultation process which involves a series meeting between the debtor and creditor. After that, it moves into the negotiation stage between both parties and then come to the contract stage. Don’t waste time! Our writers will create an original "Examining Corporate Debt Restructuring Schemes In Pacific Asia" essay for you Create order Before signing the contract, borrowing company must agree to the financial conditions, for instance, terms of the interest, terms of payment and so forth (Article, 2010). The objectives of corporate debt restructuring are to support continuing economic recovery, enable debtors to continue their business operations, and promote fair debt repayment to the creditors. Hence, it is including of debt rescheduling, interest rate reduction, debt for equity swaps and debt forgiveness (Makhija, 2008). However, this corporate debt restructuring considered as the final option for a company before it goes into insolvency. Besides that, there are three popular approaches of corporate debt restructuring scheme to restructuring the debt. The three approaches are centralized, decentralized, and London approach. Government plays as a leading role in this centralized approach. This approach is only suitable for small size of debt and simple corporate structure. Moreover, this model is unsuitable because government is enjoys high levels of confidence while success cases in this approach for large debt complex restructuring was unknown. This approach was conducted in Sweden in the early of 1990 and Hungary in the mid of 1990 (Abd, 2000; Kolkata, n.d.). The second approach, decentralized approach is more effective than the centralized approach. It is more appropriate for those companies which are experienced a large bad debts and complex corporate structure. This approach is an informal and a voluntary process without government involvement. United States was adopted this approach in 1990 (Abd, 2000). Lastly, London approach was a non statutory and informal framework that introduced by the Bank of England in 1990 to handle insolvency. During 1990 recession, more than 160 British companies were conducted London approach (Abd, 2000). London approach encourages creditors in out of court agreements by follow certain principles. The principles are minimized losses to creditors, avoid unnecessary liquidation of viable debtors, and offer continued financial support to viable borrowers (Claessens, n.d.). It tends to rescue a financial distress companies as going concern instead of forcing them into a formal insolvency (Laryea, 2010). Besides that, many Asian countries that had been affected by the Asian financial crisis have practised the corporate restructuring scheme which is similar to London approach. Those countries are Indonesia, Korea, Thailand and Malaysia. 2.4.1 Korea Korea adopted corporate restructuring coordination committee to mediate the disputes between debtors and creditors. Corporate Restructuring Coordination Committee works under the powerful of Financial Supervisory Commission in Korea while it was established in 1998. CRCC workout process was followed to the London approach which is out of court resolution of financial restructuring cases. (Krause, 2000; Pomerleano Shaw, 2005). According to Chan (2002), there are two main causes of the corporate sector inefficiency for Korea to implement corporate debt management and restructuring at the onset of the financial crisis. The first causes was Korea manufacturing firms experienced cash flow shortage due to the excessive and inefficient investment, high leveraged and diversified businesses were financed by debts. Second, non performing loan was burdened the corporate sector and lead to the increasing number of bankruptcies. According to Chan (2002), Corporate Restructuring Coordination Committee had success in lowering the debt to equity ratio and improving interest coverage ratio of the corporate sector after Asian financial crisis. Besides that, the GDP growth rate recovered, interest rate decreased to 5.4 percent from over 19.0 percent, and unemployment rate dropped to 2.7 percent from 6.8 percent after the Asian financial crisis. The improvement has shown that the corporate restructuring contributed significantly to Korea rapid economic recovery. Moreover, due to the economic recovery, Korea was able to repay their IMF loans in August 2001 which is two years and eight months earlier then originally scheduled. However, non performing loans in Korea had significantly decreased from 88.6 percent in 1997 to 24.0 percent in 2001. Debt to equity ratio had trended down from around 4 in 1997 to about 2 in 2001, while interest coverage ratio also had improved (Worldbank, 2002). Thus, resolution of corporate debts in Korea has been satisfy and successful. 2.4.2 Thailand Corporate Debt Restructuring Advisory Committee was formed in June 1998 under the Bank of Thailand. CDRAC was created to mediate formal out of court workouts of non performing loans. However, Thailand was adopted Bangkok approach which is administered by CDRAC. Bangkok approach is a non binding and non statutory guidelines for efficient restructuring of corporate debt for benefits of creditors, debtors, employees, shareholders and Thai economy (Chanyarungrojn, 1999; Nashville Tennessee, 2004). According to Yupana, (2004) debt ratio increased for both business group and non group firms after the Asian financial crisis. For business group firms, the average debt to asset ratio increases from 40 percent in 1996 to 54 percent in the end of 1997. Besides that, the average ratio of total debt to total capital increases from 50 percent in 1996 to 66 percent in 1997. The average ratio of interest coverage ratio also had decreased from 11.65 percent in 1996 to 2.94 percent in 1997. Thus, the profits of business group firms had decreased significantly. CDRAC was restructured totalling of Baht 2.6 trillion in August 1999, while among them, 700 cases were large distressed loans that exceeded baht 500 million. However, CDRAC completed restructured of totalling Baht 1.1 trillion at the end of 2000. Besides that, about 400 non financial companies shown that the corporate debt ratio was declined from 3.2 percent in 1997 to 2.04 percent in the mid of 1999. Generally, corporate debt restructuring was quite effective. 2.4.3 Indonesia Indonesia government established the Indonesian Bank Restructuring Agency in January 1998 as an independent body to restructure troubled banks and their assets. Indonesian then created Jakarta Initiative in September 1998 to complement the Indonesia Debt Restructuring Agency and amended bankruptcy law. It is a London approach based principles as it involved informal framework that encouraged out of court debt workouts between the debtors and creditors (IMF, 2000; Adams Mathieson, 1999). According to Halim (2000) corporate debt restructuring is one of the important element for economic recovering, however, Indonesia Debt Restructuring Agency has not been successful. Corporate Indonesia is still highly leveraged even after the restructuring process. Debt to equity ratio is remained higher among the restructured firms. A sample of 34 cases which involved the debt of US$8 billion showed that 59 percent were resolved by using the combination of reduced interest rates. Most of the company workout only rescheduled debt, rather than improving internal operations or significantly reducing leveraging (Dfat, n.d.). 2.4.4 Malaysia Malaysia government had come out a new strategy in the mid of 1998 to solve the financial restructuring of banking sectors and corporate sectors. The strategy comprises of three agencies, which is Danaharta, Danamodal and Corporate Debt Restructuring Committee. Danaharta and Danamodal are considered as statutory options, while CDRC is considered as non statutory option (Rajandram, 1999). CDRC is similar to the London approach as it helped to renegotiate and restructure those distress companies with out of court resolution. CDRC had received 75 applicants of restructuring plan in 2000. However, CDRC had resolved 33 cases which are worth RM25.5 billion, while 12 cases worth RM11 billion remained outstanding at the end of 2000. Besides that, the debt of these 33 companies, RM4.6 billion were settled through cash payments, RM4.6 billion in bonds, and RM3.99 billion in financial notes. Thus, the non performing loan had decreased as part of these loans had been turned into performing loans (Aslam, 2005). The success of the out of court debt restructuring strategies depends on the credibility of the mediator and the cooperation among all the parties that involved in the restructuring scheme.

Describe, Giving Examples, How Different Aspects of...

DEVELOPMENT Task 1.2. Describe, giving examples, how different aspects of development can affect one another. There are many examples that show how different aspects of development can impact one another. In majority of cases, one aspect will lead to another as a natural result, so for example, if a child has a speaks foreign language as his/her first and family just came to UK to live, this may lead to having language barrier, he/she may become shy, not very communicative, isolated, which affects emotional and intellectual development, further, he/she may have difficulty making friends, which can weaken his/her self esteem, affecting social and behavioral development. Another example may be if a child was not planned in the†¦show more content†¦I remember that he could go everywhere alone, and I couldnt, I was spending more time at home, reading, as a result I love learning new things, I love studying – this definitely had impact on my intellectual and social development, I had some problems making friends, I was lucky my problems finished when I started studies and moved to my Grandma, but what could happen if I didnt have another place to go? A teenager like me could then isolate himself at home, becoming smarter and smarter on computers, internet, he could become a hacker and was arrested, transferred to prison,which would affect his social and emotional development very much. When a child is extremely overweight – we know obesity among children can disrupt their physical development and have further impacts. 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The Scarlet Ibis by James Hurst Free Essays

The Scarlet Ibis is a short story by James Hurst weaving the tragic tale of Doodle, a disabled child and his brother, the narrator. Doodle’s life has been a series of close calls; the only reason he is alive is the love and persistence – and occasional cruelty – of his brother. Brother’s only motivation is to make Doodle like other kids in order to avoid the embarrassment of having a six-year-old brother who cannot even walk, amounting to what is, in essence, a battle with his own ego. We will write a custom essay sample on The Scarlet Ibis by James Hurst or any similar topic only for you Order Now As the story continues, Brother tries to fix the irreparable hole in his heart caused by his shame and selfishness toward Doodle. Brother is constantly reminding Doodle of his own debility, bringing to light Doodle’s unwillingness to participate in his brother’s cold-blooded attempts to point out Doodle’s mortality. When Brother makes Doodle touch the casket, he knows what to expect from Doodle. â€Å"Doodle was paralyzed, so I put him on my shoulder and carried him down the ladder, and even when we were outside in the sunlight, he clung to me, crying, ‘Don’t leave me. Don’t leave me. ‘†(486). Doodle is utterly terrified of the casket, and his brother is aware of it. By making Doodle touch the casket, he is imprinting upon Doodle that he can never be normal, that he will always be teetering on the brink of life and death, never to be able to live up to his full potential. However cruel Brother’s actions may be, he still takes an interest in Doodle, purely for his self-satisfaction. â€Å"When Doodle was five years old, I was embarrassed at having a brother of that age who couldn’t walk, so I set out to teach him. (488) Brother teaches Doodle how to walk, but it is purely for his own conscience. Embarrassed by Doodle’s condition, he tries to fix Doodle’s many abnormalities, without considering Doodle’s own views and feelings. The only thing that Brother wanted was a sibling with which he could play with, and the arrival of Doodle shattered his hopes. As a result, he makes Doodle pay for it on ma ny occasions, the last of which took the life of his younger brother. â€Å"For a long, long time, it seemed forever, I lay there crying, sheltering my fallen scarlet ibis from the heresy of the rain. (493). In the end, Brother finally realizes the effects his actions have on young Doodle. The emotional trauma of his brother abandoning him in the rain combined with his preexisting physical conditions came together in a perfect storm, bringing to light the final effects of Brother’s ambition-driven actions, a simple childhood act of spite with devastating results. Throughout the story, Brother tries to show both sides of the double-edged sword that is pride. I did not know then that pride is a wonderful, terrible thing, a seed that bears two vines, life and death. †(488) Brother’s pride pushes him to give Doodle an existence away from his bed, and it is this obsession that leads to Doodle’s tragic demise. Brother’s pride did create a facsimile of re al life for Doodle, but in the end, it crumbled, brought to its knees by pride and selfishness. Brother did love Doodle, but his ego overshadowed the fact the he was just trying to protect Doodle from a world that doesn’t tolerate those that are different. Doodle dies sad and broken, abandoned by the one person he looked up to. Brother proves himself no better than Doodle, showing himself to be as morally destitute as Doodle is physically incapable. In the end, however, Brother realizes that Doodle could not have led the life he left without his big brother leading the way for him. Brother may have acted cruelly toward his brother, but in the end, he realizes that some things cannot be changed, no matter the amount of love and persistence. How to cite The Scarlet Ibis by James Hurst, Essay examples