Jobs Opening Up For Restructuring Professionals
The market for highly leveraged transactions in the U.S. and Europe has hit a plateau, but deals in the bankruptcy, workout, and restructuring markets will pick up significantly, and investors will demonstrate continued interest in industries with long-term growth prospects, such as energy and healthcare, according to global accounting and consulting firm, KPMG Corporate Finance LLC. That view is underscored by a new study conducted jointly by Debtwire, Bingham McCutchen, FTI Consulting and Macquarie Securities. The study shows there is a sizeable and growing interest in distressed debt investing which will persist this year. The U.K. is also expected to see a wave of corporate restructurings this year. According to a recent FT report, the U.K. will emerge as the hub for the European distressed debt market.
The trend is creating a wealth of opportunities within corporate restructuring practices. Firms offering restructuring advisory and investment banking services to corporations and creditors dealing with stress, distress and bankruptcy will be expanding their ranks. Executive search firm, A.E. Feldman, reports that distressed specialists or professionals with expertise in underwriting, restructuring, valuation and workouts are in high demand. Looking ahead, Ken Meehan, Editor of Debtwire, North America, says there promises to be much more competition among a wider pool of professionals.
Global M&A activity has stalled as international economic activity softens, according to KPMG Corporate Finance LLC. The firm sees a challenging U.S. deal market this year as fallout from the credit crunch lingers and concerns about a consumer-driven recession weigh heavily on companies across many sectors.
On the flip side, KPMG Corporate Finance LLCÂ predicts a handful of sectors will experience growth in 2008 including: education, information technology and consulting services, energy, and health care. The firm also expects deals in the bankruptcy, workout, and restructuring markets to pick up significantly. Stephen Gaines, Managing Director and Head of KPMG Corporate Finance in the U.S says, “Successfully creating value from these opportunities will be based on whether lenders are prepared to take fair market value for assets, many of which will likely be below the level of debt.”
That’s where distressed specialists come in. Distressed investors track industries and corporations that are poised for collapse (or those that have already fallen) and are undervalued as a result. They look to buy the discounted bonds, loans or other debt of these firms that have defaulted or are on the verge of financial restructuring. These investors are making a bet they can ride out the slide and enjoy strong returns after a turnaround.
Debtwire interviewed 101 of the largest distressed-debt market participants to gauge their outlook for 2008. The study, published in conjunction with Bingham McCutchen, FTI Consulting and Macquarie Securities found that nearly 75% of respondents plan to place more of their assets in distressed debt in 2008. Two-thirds of participants also see financial services as one of the top three sectors offering the greatest distressed investing opportunities this year.
According to Ken Meehan, Editor of Debtwire, North America, ”Refinancing opportunities and economic growth are both expected to erode in 2008, prompting expectations of a substantial increase in the amount of capital distressed debt investors plan to allocate to the asset class.” Mick Solimene, Managing Director, Macquarie Securities (USA) adds, “As the liquidity chill takes longer to thaw, distressed debt investors will have greater capital to work their way through an increasing supply of distressed opportunities in 2008.”
The UK is also expected to see a wave of corporate restructurings this year. As a result, hedge funds and investment banks are to devote more resources to the restructuring field, according to an FT report which cites a survey commissioned by Debtwire, Rothschild and Cadwalader Wickersham & Taft. The survey finds that almost two-thirds of investors expect to see a rise in corporate restructuring in Europe between March and September this year. The majority of respondents also predict that the UK would be the hub for these restructurings, followed by Germany and Spain. Moreover, the property, financial and construction industries are projected to be the most active areas for restructuring.
