Thus far, 2023 has been a year of clashing signals, creating sustained but prudent activity. Healthy liquidity in the Singapore banking system has been tempered by concerns over sustained inflation and uncertainty over interest rates. Concerns over a recession have also led to a focus on quality assets and accordingly, cautious loan growth.

While not strictly regulatory, the growing understanding of the role that lenders can play in global sustainability efforts has also led to lending policies targeted at improving such efforts, whether through industry focus (such as renewables and the circular economy) or loan offerings (such as green and sustainability-linked loans specifically adapted for a broader range of industries).

Singapore in general has had limited direct exposure to the Ukraine war. The introduction of new sanctions was an immediate direct impact, but otherwise, the impact was primarily felt through knock-on indirect effects. The full impact of the war itself may have been somewhat weakened for geographically-distant jurisdictions with limited direct exposure in the context of economies emerging out of an extended pandemic, especially for industries particularly affected by COVID-19.

In comparison to past years where adoption of unitranche and term loan B loan structures was gradual, 2022 saw an increased interest in such structures with the narrowing of pricing gaps between such structures and senior debt. While a number of significant Asian brand names have accessed term loan B markets for capital, these remain relatively rare in Singapore in comparison to senior debt.

Mezzanine and second lien financings continue to feature, with an uptick arising from the increased entry of investors into Singapore with a focus on, or mandates to invest in, such debt. Mezzanine and second lien debt backed by real estate assets remain particularly popular among lenders and investors.

Alternative credit providers continue to flourish in Asia, providing loans not just for under-banked and new industry borrowers who may not be finding it easy to access bank debt. These have ranged from P2P lending structures, to private debt providers offering terms akin to senior debt, but focusing on emerging Asian economy borrowers with less access to traditional bank debt capital. Both inbound and outbound alternative credit have seen significant activity.

In particular, with start-ups and early-stage companies from the 2010s and 2020s maturing and finding dilution or downrounds in the current climate unpalatable, there has been a flurry of activity in alternative credit providers (including specialist investors, and investors with broadened mandates) stepping in to provide debt financing to such maturing companies where conventional bank financing would otherwise still be difficult to obtain.

Loan products and offerings have become increasingly tailored to the needs and requirements of industry.

ESG and sustainability-linked lending in Singapore have expanded significantly beyond traditional benchmarks for real estate industries to focus on targets reflective of the efforts of borrowers and the industry they operate in; examples include ESG targets on investments for financings offered at the fund level, to social sustainability targets (such as labour) for manufacturing and primary industries.

Late growth-stage start-ups have also enjoyed increased availability of debt funding at holdco levels in recognition of the multi-jurisdictional operations for many of these companies. Financial covenants are usually structured to allow for growth while still measuring financial health for debt service, with equity kickers also featuring. Where appropriate, such companies have also been able to tap into asset-based financing, particularly where lenders have now gotten comfortable around the contractual structures underpinning the cash flow and assets (such as receivables primarily derived from electronic transactions) where once such structures were traditionally limited to production of physical goods.

These have necessitated reconsideration, development and adaptation of conventional loan documentation to develop bankable loan structures reflecting the actual operational requirements and needs of principals.

Previously focussed primarily on real estate, ESG and sustainability-linked lending in Singapore has grown to cover broader industries in recognition of the need for sustainability, and the role that financing plays in sustainability. Structures are based on the requirements of the Green Loan Principles and Sustainability-linked Loan Principles, and are heavily tailored to reflect meaningful goals for the particular industry in which a borrower operates.

Separate from product offerings, lenders in Singapore have also focussed financing efforts on industries which promote sustainability and ESG efforts including renewables, decarbonisation (such as adoption of electric vehicle fleets) and the circular economy.

More recently, there has also been some attention on social aspects of ESG, with some Social Loans being structured based on the Social Loan Principles, particularly with a focus on healthcare.

In Singapore, banks are generally required to be licensed under the Banking Act 1970, to operate banking and other businesses in Singapore permitted under its licence. Such licensed banks and other categories (eg, finance companies) are excluded from the Moneylenders Act 2008, which otherwise generally applies to regulating the business of moneylending in Singapore, unless exempted. Excluded moneylenders include any person who lends money solely to corporations.

See 2.1 Providing Financing to a Company.

While there are no general restrictions on the granting of security or guarantees to foreign lenders, the terms of certain private agreements may impose conditions or restrictions. For example, taking security over industrial land leased from the Jurong Town Corporation (or over such leases) may be subject to a consent requirement from the Jurong Town Corporation if security is granted to persons that are not financial institutions permitted by the laws of Singapore to lend on such security.

While there is exchange control legislation in the Exchange Control Act 1953, the Monetary Authority of Singapore Notice 754 exempts all persons from the provisions, obligations, etc, imposed under various sections of the Exchange Control Act 1953.

The use of proceeds is generally regulated by contract and is largely unrestricted. Some general restrictions against illegal purposes include use of the proceeds in breach of sanctions, anti-terrorism financing and anti-money laundering rules. Another important restriction would be financial assistance rules which prohibit a public company or a subsidiary of a public company in Singapore from taking financing to assist the acquisition of its shares or shares in its holding company. If the purpose of the loan or the loan itself was illegal or prohibited, it renders the loan unenforceable and there would generally be no recovery other than on a restitutionary basis under very limited and strict conditions (as set out in Ochroid Trading Ltd v Chua Siok Lui).

Agency and trust concepts are recognised in Singapore.

Loan transfers are primarily conducted by way of novation, and syndicated facilities would typically have a form of transfer certificate included to effect novations of debt. A secured syndicated facility would typically have a security agent or security trustee holding the benefit of such security for the pool of syndicated lenders. Other transfer mechanics include those common to other jurisdictions such as risk- and other sub-participation mechanics.

Debt buy-back by the borrower or sponsor is generally regulated by contract. Loan documentation has seen an increased adoption of either an outright prohibition against sponsor buy-backs or disenfranchisement of sponsor-affiliated lenders, with an increased presence of both sponsor-affiliated lenders and sponsor buy-backs; the latter featuring also as part of certain debt restructurings, especially in recently beleaguered industries where conventional lenders have reduced their exposure.

“Certain funds” provisions are common for public acquisition finance transactions in Singapore and are also adopted in the financing of the acquisition of private companies in Singapore in particular cases. Long-form documentation is commonly used for acquisition finance transactions (even at the term sheet stage, with long-form term sheets commonly prepared). Other than for the usual security registration requirements for Singapore-incorporated security providers, facility agreements for acquisition finance transactions are not required to be filed in Singapore where the target is Singapore-incorporated.

See 1.5 Banking and Finance Techniques.

While the Moneylenders Act 2008 does impose maximum interest (ie, a nominal interest rate of 4% per month), banks and other excluded lenders are not subject to such restriction. Contractual provisions providing for the payment of additional or an increased rate of interest may not be recoverable if they amount to a penalty under Singapore law, and the Supreme Court Practice Directions generally provided that every judgment debt shall, unless otherwise agreed between the parties, carry interest at the rate of 5.33% per annum, or at such other rate as the Chief Justice may from time to time direct, or at such rate not exceeding that rate as the Singapore court directs. With respect to penalty considerations, an 18% default interest rate was held to be a penalty in Hong Leong Finance Ltd v Tan Gin Huay.

While there are no general rules for disclosure of all loan agreements, there may be requirements particular to specific entities. For example, borrowers which are subject to SGX Listing Rules are required to disclose details of conditions in loan agreements that refer to – eg, shareholding interests of any controlling shareholder, REIT manager or trustee-manager, or a restriction on any change in control of the borrower, REIT, REIT manager or trustee-manager, or on any change of the REIT manager or trustee-manager, as well as the level of facilities that may be affected by a breach of such condition.

Singapore does not generally subject payments of principal to withholding tax. Payments of (or in the nature of) interest or other payments in connection with the loan may be subject to withholding tax under the Income Tax Act 1947, depending on the relevant jurisdictions.

Security over shares and real property are generally subject to stamp duty of up to SGD500 in Singapore. Fees may be charged by government authorities for security registrations such as registrations with the Accounting and Corporate Regulatory Authority and the Singapore Land Authority; these fees are generally nominal.

Singapore-incorporated borrowers will need to consider – eg, withholding tax considerations and the applicability of double-taxation agreements, when borrowing outside Singapore from foreign lenders.

Real Estate

One of the most common assets taken as security in Singapore is real estate. Where separate title has been issued for real estate, a mortgage over such real estate can be taken as security in the form prescribed by the Singapore Land Authority. A real estate mortgage will need to be stamped for up to SGD500 in Singapore within 14 days of execution and delivered for registration to the Singapore Land Authority with the title documents in relation to that property and payment of a nominal registration fee to the Singapore Land Authority. Failure to have the document stamped renders it inadmissible in court, and late stamping is subject to financial penalties.

Shares

Share security over shares issued by a Singapore-incorporated company is also common. Customary deliverables and perfection steps differ depending on whether those shares are issued by a private or public Singapore-incorporated company and, in the latter case, may differ further depending on how those shares are held. Share security is subject to stamping of up to SGD500 in Singapore.

Floating Charges

Singapore also permits floating charges over all present and future assets of a Singapore-incorporated company; such security would commonly be taken by way of a general debenture. This would usually be drafted to cover all assets, including shares and real estate, and would similarly need to be stamped for up to SGD500 in Singapore.

Registration of Securities

Particulars of security created by a Singapore-incorporated company are generally registrable in Singapore with the Accounting and Corporate Regulatory Authority for a nominal fee of SGD60. The Companies Act 1967 prescribes categories of registrable security but these are generally very broad. Registration needs to be completed within 30 days of execution if executed in Singapore. Failure to register results in such security being void against the liquidator and creditors of that security provider.

Stamping and registration of particulars of security in Singapore are generally conducted through the online systems of the relevant government authority and are fairly instantaneous. As a matter of practice, however, parties generally buffer one to three business days to complete these, to account for contingencies and disruptions.

Singapore permits floating charges over all present and future assets of a Singapore-incorporated company.

Subject to considerations of corporate benefit, particularly in the case of upstream and cross-stream guarantees, it is not unusual for lenders to take such guarantees. Other limitations include the financial assistance rules, mentioned in 3.4 Restrictions on the Borrower’s Use of Proceeds, in relation to provision of guarantees by a Singapore-incorporated public target or its subsidiaries supporting the acquisition of shares in itself or its subsidiaries; restrictions in the Companies Act 1967 on the giving of guarantees covering indebtedness of corporate entities not within the same group structure; as well as any restrictions imposed by a company’s constitutive documents or private contracts. If guarantors are not within the same group structure (ie, they do not share the same holding company), parties will also need to consider whether the guarantee structure contravenes the Companies Act 1967 prohibitions on the granting of guarantees by a company to third parties that are connected with the directors of that company.

Financial assistance restrictions apply where the target is a Singapore-incorporated public company or subsidiary thereof. The Companies Act 1967 provides for several whitewash methods and exclusions. The most common whitewash methods include a long-form whitewash which takes at least a month in practice and involves public notifications; and one of the short-form whitewash methods which requires statutory solvency statements from the directors of the company providing financial assistance.

Other than the above, greater diligence is usually required for regulated security providers. Licence terms and legislation may prohibit or set conditions on the granting of security or guarantees. For example, the Securities and Futures (Licensing and Conduct of Business) Regulations set conditions on the creation of security by a capital markets services licence holder over its customer’s assets. Housing developer licences may also contain restrictions over liabilities, which may be secured by a mortgage over the housing property to be developed. Where contracts and contractual proceeds are a key component of a security package, contractual restrictions against assignment and creation of security are critical. In such cases, diligence and the actions required to obtain consent where possible become significant (but not always insurmountable) hurdles in the feasibility assessment of such security.

Singapore law-governed security is typically released by a deed of release or deed of discharge, save where security was taken in a prescribed statutory form (eg, a Singapore statutory mortgage), where local authorities may similarly prescribe statutory forms of release.

The rules of priority of competing security interests in Singapore are complex. Between the same type of registered security interests, the security interest created first in time generally has priority. This is then complicated by priority between different types of security interests; for example, a perfected legal assignment would generally take priority over an unperfected equitable assignment, and floating charges rank behind fixed charges. Contractual subordination of claims is a common contractual structure adopted in Singapore law financings where senior creditors, subordinated creditors and the borrower enter into a contractual subordination deed setting out the relevant priorities.

In an insolvency of a Singapore-incorporated company, the Insolvency, Restructuring and Dissolution Act 2018 provides for certain payments to be paid out in priority to unsecured debts. These are mandatory and generally include wages and salaries, retrenchment benefits, work injury compensation and tax.

The Insolvency, Restructuring and Dissolution Act 2018 also provides that the Singapore court may make an order for “rescue financing” for a company which has applied for a scheme of arrangement or in judicial management, to be accorded with super priority in a winding up or (where the company would not have been able to obtain the rescue financing from any person unless secured and there is adequate protection for the interests of the holders of existing security interest) with higher priority security. In the context of judicial management, a lender with security over the whole (or substantially the whole) of the company’s property and which is, or may be, entitled to appoint a receiver and manager of such assets, may oppose the making of an order for judicial management, and if so opposed, the court must dismiss an application for such order.

Typically, Singapore law-governed security documents will provide that a secured lender can enforce its collateral upon the occurrence of a trigger event; this is usually either an “event of default” or an “acceleration event”. Initial and usual enforcement remedies are primarily self-help (eg, letters of demand, appointments of private receivers where contractually provided) with court processes (eg, winding-up, injunctions, court-appointed receivers) also available to supplement such self-help remedies. Insolvency and restructuring-related processes could trigger moratoria on enforcement, and insolvency legislation also limits enforcement of certain contracts solely by virtue of insolvency (ie, restrictions on ipso facto clauses); these are further detailed in 7.1 Impact of Insolvency Processes.

The choice of foreign law to govern contracts is generally upheld by Singapore courts, but would not be recognised if the choice of law was not bona fide and legal, or if there were reasons for avoiding the choice of law on the grounds of public policy. Singapore has passed the Choice of Court Agreements Act 2016 to give effect to the Convention on Choice of Court Agreements. This provides a statutory framework for recognising and upholding exclusive choice of court agreements designating the courts of contracting states. Contractual waivers of immunity are frequently included in Singapore law-governed finance documents.

The Choice of Court Agreements Act 2016 also provides the statutory framework for recognising and enforcing judgments of the foreign courts of other similarly contracting states designated in exclusive choice of court agreements, subject to the exceptions in the Convention on Choice of Court Agreements. This is supplemented by prior legislation such as the Reciprocal Enforcement of Foreign Judgments Act 1959, which recognises certain foreign judgments from the specified foreign jurisdictions, which may not have been covered by the Choice of Court Agreements Act 2016. For international arbitral awards, the International Arbitration Act 1994 gives effect to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards and provides that the relevant arbitral awards may be enforced and judgment entered with the permission of the court.

There are generally no restrictions requiring a lender to be authorised or qualified to carry on business in Singapore solely to enforce its rights under a valid loan agreement or security agreement.

The Insolvency, Restructuring and Dissolution Act 2018 provides for moratoria in certain insolvency-related situations (eg, if a Singapore-incorporated company is placed under judicial management and placed under a scheme of arrangement). Such moratoria would generally restrain proceedings and enforcement of security against that company. For a scheme of arrangement, an automatic worldwide moratorium applies for 30 days from the date that the relevant application is made.

The Insolvency, Restructuring and Dissolution Act 2018 also restricts the exercise and enforcement of ipso facto clauses in contracts which allow for termination, acceleration, etc, by reason of insolvency or commencement of insolvency proceedings. Certain specified contracts are excluded from the ambit of the restriction. However, there is no broad exclusion for all types of loan and security agreements.

Secured creditors are generally paid in order of priority to the extent of the security. Otherwise, when a Singapore-incorporated company is wound up, certain preferential debts must be paid before all other unsecured debts. Key preferential debts include:

• the costs and expenses of the winding-up incurred by the official receiver, and any other costs and expenses of the winding-up;
• all wages or salaries;
• all amounts due for work injury under the Work Injury Compensation Act 2019;
• other specified amounts due in relation to employees (eg, specified contributions under provident funds, remuneration payable for specified leave and retrenchment benefits); and
• the amount of all tax assessed and all goods and services tax due under any written law, before commencement of the winding-up or assessed at any time before expiration of the time fixed for the proving of debts.

Schemes of Arrangement

The length of the process and recovery for creditors varies depending on the circumstances and specific terms of the particular scheme of arrangement.

Judicial Management

Judicial management typically lasts for 180 days from the date of the court order or creditors’ meeting approving the appointment of a judicial manager. The judicial management can be extended by an application to court by the judicial manager or by the approval of a majority in number and value of the creditors. Recoveries to the creditors is highly dependent on the assets available to the debtor company and any proposed restructuring plan put forward by the judicial manager.

Liquidation

The length of the process and recovery for creditors varies depending on the circumstances (including time taken to realise assets and adjudicate proofs of debt) and the unencumbered assets available for distribution.

Rescue and reorganisation procedures in Singapore include the following.

Schemes of Arrangement

This is a statutory restructuring process whereby a company and its creditors seek to agree on a restructuring scheme to be court-sanctioned and eventually approved. The Insolvency, Restructuring and Dissolution Act 2018 introduced new features such as cram-down provisions to empower the court to approve schemes in certain cases, despite dissenting classes of creditors and pre-packaged restructuring plans, without the need to convene creditor meetings.

Judicial Management

This is a restructuring option similar to the English administration regime. Judicial management in Singapore is intended to rehabilitate a company where liquidation or winding-up would be less advantageous. The Insolvency, Restructuring and Dissolution Act 2018 introduced changes to allow foreign companies with a substantial connection to Singapore to apply for judicial management and also to limit a secured creditor’s right to veto judicial management orders.

Both options feature statutory moratoria on debt enforcement in order to give the company breathing space while it proceeds with the reorganisation process.

The Insolvency, Restructuring and Dissolution Act 2018 also introduced the possibility for distressed companies to obtain fresh finance while undergoing reorganisation. A distressed company can make an application to the court for an order granting super-priority status to debts arising from the rescue financing; such orders could include the granting of priority over all other preferential debts, or allow the creation of a security interest over existing encumbered assets and the subordination of any existing security interests.

In this connection, the court has also approved the “roll-up” of a rescue lender’s pre-existing debt into a super-priority debt. This is achieved through applying a portion of the rescue-financing proceeds towards repayment of the rescue lender’s pre-existing debt.

As mentioned in 7.1 Impact of Insolvency Processes, lenders need to tackle new considerations arising from the Insolvency, Restructuring and Dissolution Act 2018. These include the restriction on enforcement of ipso facto clauses. In certain cases, parent guarantee provisions have been bolstered in attempts to address such ipso facto restrictions and to ease and allow enforcement for parent companies falling outside the scope of the restrictions. Additional considerations from the Insolvency, Restructuring and Dissolution Act 2018 include those mentioned above, such as new moratoria provisions (eg, the automatic 30-day worldwide moratorium for schemes of arrangement), and the introduction of cram-down provisions and priorities granted to rescue financings. Coupled with the ability of foreign companies (not just Singapore-incorporated companies) to seek restructurings in Singapore under the Insolvency, Restructuring and Dissolution Act 2018, where qualified, and the adoption of the UNCITRAL Model Law on Cross‑Border Insolvency, it has becoming increasingly important, if not already absolutely crucial, for lenders to come to terms with the insolvency and restructuring regimes in Singapore.

Singapore project finance activity is primarily out-bound with both the public and private sectors actively working together to further cement Singapore’s status as an infrastructure financing hub providing financial, advisory and other services across the entire value chain and from conception to financial close. Major industries benefiting from the expertise include renewables and transport. The depth of project finance activity has also led to multiple launches of project finance securitisations in Singapore.

Given Singapore’s geographical footprint, where debt is required for domestic infrastructure projects in Singapore, these have been historically well-funded by banks or the public sector. The introduction of the Significant Infrastructure Government Loan Act 2021 further allows the Singapore government to borrow up to SGD90 billion to pay for qualifying infrastructure projects.

The three main sources of laws, regulations and guidelines for PPP transactions in Singapore are the Public Private Partnership Handbook, the Government Procurement Act 1997 and the Government Procurement Regulations 2014. With the introduction of the Significant Infrastructure Government Loan Act 2021, it remains to be seen what impact this will have on projects which may otherwise have been structured as a PPP, or whether the PPP model will continue primarily for specific projects such as existing use cases which have demonstrated success.

Project documents for domestic projects in Singapore are usually Singapore law-governed with disputes resolved in Singapore. In the case of project financings led out of Singapore for projects located in other jurisdictions, the general preference remains for the underlying project documents to be Singapore law-governed or English law-governed with disputes resolved in the relevant courts or an acceptable arbitral venue unless prohibited by local laws.

Although foreign companies intending to conduct business in Singapore are required to be registered in Singapore and if so registered, may own real property in Singapore, given the ease and benefits of incorporation in Singapore, most (if not all) project companies for domestic infrastructure projects are incorporated in Singapore even where projects are awarded to consortiums comprising foreign investors.

A project company for a project in Singapore would typically be a Singapore-incorporated company incorporated under the Companies Act 1967. Restrictions may be imposed by the relevant project documents, and qualifications and restrictions would typically have been clarified as part of the tender process. Historical PPPs have included project companies formed by a consortium of local and foreign investors.

As mentioned in 8.1 Recent Project Finance Activity, project financing lending in Singapore has largely been outbound, with lenders primarily being banks and multilaterals. Given Singapore’s geographical size, where debt is required for domestic infrastructure projects, these have been historically well funded by banks or the public sector.

Given Singapore’s geographic characteristics, the extraction of natural resources is not a feature.

The key regulator on broad environmental matters is the National Environment Agency, and on health and safety laws, the Ministry of Manpower. Projects might also involve other regulatory bodies depending on the type of project.

Generally, the following environmental, health and safety legislation would apply broadly to projects:

• the Environmental Protection and Management Act 1999;
• the Environmental Public Health Act 1987;
• the Sewerage and Drainage Act 1999; and
• the Workplace Safety and Health Act 2006.