London, United Kingdom
Launched this week by international law firm Cadwalader, Wickersham & Taft LLP and investment banking group Rothschild, in conjunction with Mergermarket's Debtwire, the third annual European Distressed Debt Market Outlook provides a comprehensive and in-depth report of the opinions and expectations of European and U.S. investors regarding the outlook for the European distressed debt market in the year ahead. For the first time, the 2007 report also features sections on private equity sponsors and corporates who have been through a restructuring in the last two years.
Among the noteworthy findings are: a resounding 83% of private equity sponsors expect to play an active role in a restructuring in 2007, while 60% of private equity investors expect between 11% and 20% of the 'typical' portfolio to be hit by covenant amendments or debt restructurings.
Of particular note was the changing role of relationship banks and hedge funds. Respondents report that they have found relationship banks difficult to deal with in restructurings. Experience with hedge funds was more mixed, with some respondents commenting that hedge funds can be constructive, while others were negative. It is also telling that companies' highlighted the importance of maintaining support from other stakeholders, such as customers, suppliers, employees and pension scheme trustees, to ensure a successful restructuring.
Additional findings of the distressed investor survey include:
-- Almost two-fifths of respondents have increased their asset allocation to distressed, reflecting a considerable increase in confidence compared to last year.
-- The majority of respondents expect an increase in restructurings to begin towards the end of 2007/early 2008, following an extended period of high liquidity and bankers' decisions to waive covenant breaches.
-- Respondents perceive significant growth potential in restructuring situations from France and Italy.
-- Hedge funds and other active investors are looking up the debt capital structure to second lien and mezzanine.
Commenting on the survey, Richard Millward, Managing Director, Rothschild, said "The clear message from this survey is that the restructuring wave is yet to break, but activity is definitely intensifying. The impact of non-bank institutions as holders of debt will make the next round of restructurings more complex."
Cadwalader Partner Richard Nevins added, "Opinions vary as to precisely when restructuring activity will next surge, but market participants agree that the volume and number of future distressed situations must take into account the huge increase in highly levered deals in recent years."
Cadwalader, Wickersham & Taft LLP, established in 1792, is one of the world's leading international law firms, with offices in New York, London, Charlotte, Washington and Beijing. Cadwalader serves a diverse client base, including many of the world's top financial institutions, undertaking business in more than 50 countries in six continents. The firm offers legal expertise in antitrust, banking, business fraud, corporate finance, corporate governance, environmental, healthcare, insolvency, insurance and reinsurance, litigation, mergers and acquisitions, private client, private equity, real estate, regulation, securitisation, structured finance, and tax. More information about Cadwalader can be found at www.cadwalader.com.
Rothschild is one of the world's leading independent investment banking groups. The Group currently has over 30 offices operating in 20 countries, employing over 2,000 personnel worldwide. Rothschild is a market leader in the investment banking industry in Europe, particularly in the UK, France, Italy and Germany, and also in the US, Asia and Latin America. Rothschild's Debt Capital Markets and Restructuring Advisory business is the world's leading independent debt advisory practice, with 75 professionals across the US, Europe and Asia, of whom 30 are based in London with specialist banking, capital markets, derivative, structured finance, pensions and restructuring expertise. More information about Rothschild can be found at www.rothschild.com.
Debtwire publishes real-time news and data for financial professionals in the distressed debt and leveraged finance markets around the world. With the largest network of dedicated event driven journalists based in 53 locations across Europe, North America, Latin America, Asia-Pacific, the Middle East & Africa, Debtwire offers the most comprehensive leveraged finance news service available today. Debtwire is part of the Mergermarket Group, a division of the Financial Times Group. The FT Group is a division of Pearson plc, the international media group. Visit www.debtwire.com.
CONTACT: Cadwalader, Wickersham & Taft LLP Marc Hazelton +44 (0) 20 7170 8531 marc.hazelton@cwt-uk.com or Jane Fordham +44 (0) 20 7067 0622 jfordham@golinharris.com or Richard Millward +44 (0) 20 7280 5000 richard.millward@rothschild.co.uk or James Vaux +44 (0) 20 7280 5000 james.vaux@rothschild.co.uk or Simon Anam +44 (0) 20 7059 6101 sa@remarkeurope.com
Source: Business Wire (Business Wire India)