Asia-based financial lawyers find themselves in an interesting push-pull situation with the rest of the world.
For some, advising clients is about making local tastes palatable to deep-pocketed and sophisticated investors beyond a country’s borders. For others it is a matter of adapting international preferences in a domestic setting.
Educating overseas bankers and lawyers is one of the challenges when taking Asia to the rest of the world, says Prashant Gupta, a partner at Amarchand & Mangaldas & Suresh A Shroff in New Delhi. His firm handled the $90m initial public offering in 2012 of rice trader Amira Nature Foods on the New York Stock Exchange, requiring a restructuring and listing of an offshore parent company.
Amira was the first consumer-focused Indian company to undertake such a listing, and had been family-owned and operated for more than a century.
In contrast, the handful of tech companies that undertook offshore listings tended to be venture-capital-backed, and their business structures and marketing strategies felt more familiar to foreign advisers and investors. “Basmati rice is not the easiest sector to sell to international investors and get them to understand things of that nature,” Mr Gupta says.
In November 2013, India’s ministry of finance simplified matters by permitting companies to list abroad without a domestic listing requirement.
But companies still need to undergo a restructuring process that takes about 15 months to bring them into compliance with overseas exchanges.
Advisers in Australia found themselves in the opposite position, trying to adapt international preferences to a domestic setting.
In the wake of the 2008 financial crisis, G20 leaders in 2009 committed to reform and tighter regulation of the global over-the-counter derivatives market, and ultimately the mandatory clearing of these securities. But that directive has been interpreted differently by US and European regulators.
In the case of the Australian Securities Exchange, picking one system over another was not going to lead to an optimal solution for the company, market participants and regulators.
Australia had a “unique starting point”, explains Scott Farrell, a Sydney-based partner at King & Wood Mallesons (KWM), which acted for the ASX as it set up the first domestic clearing house for OTC derivatives.
Unusually for its size, Australia’s market participants are very sophisticated: the large pension funds and banks are well informed about overseas regulation and which aspects of the different US and European systems they prefer.
“The ASX actually had to tailor their offering to meet all of the commercial requirements of all the Australian participants, rather than simply build something they wanted it to be,” Mr Farrell says.
The eventual solution for the ASX blended market participants’ favourite elements of the US and European systems into the Australian framework.
This result required changes to Australian legislation, which in turn meant cross-checking interactions with other laws. Regulators and bankers from the US, Europe and Asia have been very interested in what Mr Farrell and his team at KWM have accomplished for the ASX.
Although situations like this are often reactions and responses to decisions in western markets, the unique local solutions can be attractive and familiar to overseas investors.
Dominic Emmett, a partner at Australia-based Gilbert + Tobin, thinks advisers round the region need to be able to cater to international tastes.
In 2013 his restructuring team advised US-based hedge funds Centerbridge Partners and Oaktree Capital Management when they were unexpectedly gazumped in a debt-for-equity recapitalisation play for financially troubled surfwear maker Billabong International.
Centerbridge and Oaktree had already bought hundreds of millions of dollars worth of existing senior-secured debt when, in mid-July, Billabong’s board announced it would accept a A$395m rescue package from rival US funds Altamont Capital Partners and GSO Capital. The offer included some rather demanding terms, notably a very high break fee representing 20 per cent of the A$325m bridging facility.
These features made the deal anti-competitive and coercive, Centerbridge and Oaktree argued. They took their complaint to the Takeovers Panel and were ultimately successful.
“Innovation is how we give these US funds what they get elsewhere in the world – such as in the US, UK and Europe – in the Australian market,” Mr Emmett says.
This story has been amended since original publication to reflect the fact that Amira Nature Foods is listed only on the New York Stock Exchange.