2010 August 17
NEW YORK, N.Y., August 17, 2010 – U.S. businesses will continue facing significant challenges in navigating a sluggish and uncertain economic recovery, according to a roundtable of leading corporate restructuring experts convened by Dow Jones Daily Bankruptcy Review (DBR) and sponsored by Kurtzman Carson Consultants (KCC). The DBR Roundtable’s participants addressed current trends as well as long-term risks facing companies, such as fluctuating credit markets, restricted and limited financing options, and the forecasted “wall of debt” scheduled to mature between 2012 and 2015.
The DBR Roundtable’s participants brought a variety of viewpoints to the discussion based on their respective areas of expertise within corporate restructuring and distressed investing. Participants included Jonathan Carson, co-founder and managing director of KCC; Jonathan Henes, partner, Kirkland & Ellis; Richard Levin, partner, Cravath, Swaine & Moore; Wray Thorn, senior managing director, Marathon Asset Management; Andrew Troop, partner, Cadwalader, Wickersham & Taft; and Wayne Weitz, senior managing director, Glass Ratner. The panel was moderated by Nicholas Elliott and Marie Beaudette of the DBR editorial team.In looking at current market trends, the group addressed the “amend and extend” phenomenon, also referred to as “extend and pretend,” whereby companies refinance their credit facilities with amendments that allow them to extend their debt. The prevalence of hedge fund involvement and valuation fights during Chapter 11 also sparked discussion regarding the positions and strategies that distressed lenders have utilized in recent years and within the current market to maximize investments and recoveries. The discussion also touched upon the commercial real estate market as the potential “epicenter of the next bankruptcy earthquake.” According to the group, the long-term outlook for corporate restructuring and distressed investing indicates more trouble ahead for companies navigating the volatile credit markets and “idiosyncratic risk” specific to individual companies vs. the systemic risk experienced during the past two years. Participants emphasized that there will be implications and far-reaching global impact from the European debt crisis and the financial regulatory reform. In addition, participants expect that the state of corporate debt will likely cause further distress down the road as more than $1 trillion in corporate debt is scheduled to come due over the next few years.
“Despite the sense of calm we’re seeing in the market today, industry analysts believe that we are in the midst of a long-term restructuring cycle, especially as U.S. companies face significant default risks due to the forecasted ‘wall of debt’ expected to reach maturity between 2012 and 2015,” commented Jonathan Carson of KCC. “As a result, we expect that corporate restructuring will likely remain a common fixture of the U.S. economic landscape as companies seek ways to strategically restructure debt obligations and contend with other challenges presented by an uncertain economic recovery.”
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