The client runs a small family business importing and exporting goods from the neighbouring ASEAN countries; and has been doing it for 35 years. Being old school, he runs his business on the basis of relationships and personal ties. He has used the same bank for all his financial needs over the last 45 years. Conservative in his borrowing, he has one commercial loan secured by a mortgage over his shop; and a renovation loan (surprisingly, this was in the form of an overdraft facility) secured by his home.
During the economic slowdown, his business took a hit and cash flow became a problem. The client started to miss loan repayment instalments which amounted to $15,000 per month; paying them intermittently, whenever he could. Each month he struggled to raise the funds required to pay the loan instalments falling due. Snowballing default interest became an insurmountable burden, overshadowing even his anxiety over his failing business.
WHY HE CAME TO SEE US
By the time he came to see us, he had received a letter of demand from his bank. They had threatened to foreclose on both loans. The Bank’s employee who had served as his relationship manager over the last twenty years had left the Bank. The new relationship manager taking over his account was not sympathetic – “new brooms sweeps client” as the saying goes – the new manager’s prevailing concern was to reduce the Bank’s exposure in a recession.
Backed into a corner and feeling overwhelmed, the client came to see us, not expecting any more in terms of legal services than to help him “buy” some time with the Bank while he desperately finds a way to raise funds to stave off re-possession of his family home.
WHAT WE ACHIEVED
A quick investigation of our client’s borrowing history and current property valuations showed that –
- his residential property is valued at $2.3 million and his shop house at $1.1 million (current valuations).
- that the client’s total debt to the Bank is $900k, a mere fraction of the total worth of the mortgaged properties – our client was over-securitized!
We called our Banker and within a few days, they offered to re-finance his loan by giving him a NEW term loan secured by his residential property only. As residential term loans bear much lower interest rates than an overdraft loan, the client’s liability to his new bankers was now reduced to a manageable $2,500 per month.
Our client was so relieved and heartened by his change of status, that he could now focus his attention back onto his business. To help him ride out the recession, he was able to sub-let his shop house for $5,000 per month. From the brink of a bankruptcy action, our Client now enjoys a fixed monthly income of $2,500!
The information contained here is only intended to provide general information on the subject covered. Nothing in this publication should be regarded as constituting legal advice concerning any particular business, operational or other situations with which you might be faced. Further, the law may have changed since first publication and the reader is cautioned accordingly. Please seek professional advice before taking any action.
Chris Chua & Associates LLC
Chris Chua & Associates LLC is a limited liability law corporation with unique entity number: 201826324Z and regulated by the Ministry of Law, Singapore, license number: LSRA/LLC/2018/00019. Its registered office and principal place of business is at 138 Robinson Road, #10-04 Oxley Towers, Singapore 068906.
Based in Singapore, we advise both local and international clients who wish to expand and preserve their business interests and wealth. Our Firm has assisted corporations in establishing and structuring new investments and business ventures in different sectors. We think beyond obvious legal issues and come up with pragmatic solutions to challenging commercial problems.