COVID-19 and Debt Capital Markets: An Asia Pacific View

Q&A Interview with Kenneth Cheong of Corporate Trust, APAC

COVID-19 and Debt Capital Markets: An Asia Pacific View

Q&A Interview with Kenneth Cheong of Corporate Trust, APAC

June 2020

How has the COVID-19 situation changed the way that you've been able to support your clients?

 

Debt capital markets and loan markets, now more than ever, are key sources of funding. This has translated into a greater sense of urgency in client requests and questions, and in many cases, a greater complexity. What clients need is a solid, safe pair of hands who can bring expertise to bear very quickly to support them.

 

In this environment, our relationship, operations, and technology teams in APAC have responded with resiliency. We looked through almost every process to figure out how we could effectively transition from an office environment. We've achieved this through the use of technology to complete transactions and conveniently communicate with colleagues and clients. The client feedback that we've gotten on our ability to host video conferences and other virtual communications has been excellent.

 

How have your work setup and working arrangements changed?

 

I've had to learn a lot of new things. It helps to maintain some of the disciplines that you have in a regular environment. For me, that means waking up at the same time every morning and doing what I used to do before heading out to work. It helps me get into work mode.

 

Technology has really helped to ensure I stay connected and productive at home. That being said, it also helps to maintain the discipline of taking breaks. There can be a tendency to work through without pause, but effectiveness starts to suffer without proper rest. Working at home, that's harder to achieve, but I’ve found ways to adjust creatively.

 

What changes and trends have you been seeing in the APAC bond environment - before, during, and after COVID-19?

 

When COVID-19 went global, issuance activity dropped. Now we’re seeing new activity, although the ways of doing business have changed.

 

When you look at a bond deal, roadshows for potential investors were typically held in person. Instead of business travel and physical meetings, these and other key transaction execution activities have now shifted online. It was quite a shift in mindset.

 

We’ve seen that well-known investment-grade issuers are able to bring deals to market as before, but others, particularly debut issuers, have found it more difficult. For example, issuers who might have been able to market vanilla bonds or unsecured bonds may now need to factor in credit enhancement features to meet investor expectations.

 

In the high yield space, we're also receiving more requests around liability management and restructuring as issuers navigate choppy waters.

 

Finally, we've been very privileged to support sovereigns in the region over the years. In many places, COVID-19 response funding needs to come directly from the government, and governments in turn need to ensure that they secure the right level of funding as well by issuing debt.

 

Looking forward, we feel we will see more recovery in the pipeline. Market participants are adapting rapidly. And encouragingly, some places have begun planning or starting a measured return to business. What happens in the third quarter is going to be key.

 

Has there been a shift in focus on ESG with either issuers or investors?

 

The level of ESG activity has likely been impacted along with other classes of issuance, given the global impact of COVID-19, but long-term factors will continue to promote ESG growth. ESG funds are still looking for opportunities in the APAC region. There’s a growing awareness around the broader benefits of aligning capital raising and funding to green-positive activity. In addition, certain regional governments have also begun to promote ESG issuances more proactively.

 

So, I think we will see that momentum continue, especially in the social space to address new economic challenges. Social bonds may become a valuable source of funding in order to be able to allocate capital to where it's needed most for these issues.

 

What kinds of questions are you hearing from clients?

 

At first, many clients asked about our resiliency plans, particularly if we provide complex transactional reporting or monitoring for them. We did calls with these clients early on to review how we were rapidly moving to a new environment.

 

Clients and their advisors have also asked about different kinds of structures for tapping the capital that they need. They bounce more ideas off of us around whether one type of structure might work versus another.

 

Finally, we’ve seen an increased sense of urgency from clients. It's been critical for us to be able to respond rapidly and effectively because we live in a fairly volatile environment right now.

 

What the situation has proven is that we can't sit back and be complacent. It’s important to look at lessons we've learned in terms of how we can improve processes, make ourselves more resilient, do even better for our stakeholders, and take on the new challenges that this uncertainty brings about. A new form of operating environment has emerged, which provides an opportunity for us to continue to evolve.

Kenneth Cheong

Corporate Trust business development


Ready to grow

your business?

Speak to our team.

Ready to grow your business? Speak to our team.