2009-01-27 22:30:05 -
Debtwire, a publisher of real-time news and data for financial professionals in fixed income markets, today released a timely report revealing that a majority of asset managers and traders surveyed anticipate a rise in North American distressed M&A deals in 2009 as consolidation and forced sellers scramble to deal with the current economic climate.
The North American Distressed Debt Market Outlook 2009, produced in conjunction with Bingham McCutchen LLP, FTI Consulting, Inc. and Macquarie Capital (USA) Inc., is based on interviews with 100 hedge fund managers, prop desk traders and other asset managers to forecast their anticipations for distressed debt in the region over the coming year.
Key findings from the survey include:
·
Financial services sector is expected to offer the most opportunities for distressed investors. Auto manufacturers and suppliers may be the most lucrative sector for investors in 2009. Opportunities are expected to be spread relatively evenly throughout other sectors, reflecting the breadth of the recession.
· 73 percent of respondents predict an overall decrease of the liquidity in distressed debt trading. As the consolidation among banks and fund closures in 2008 are expected to carry over into 2009, competition for positions will be cut, allowing new funds to push into the market. Investors likely will continue to see a buyers' market in 2009, allowing them to be more selective with where they commit their capital.
· 2008 saw a 23 percent increase from 2007 in respondents who did not use hedging strategies. With significant declines across all markets in 2008, most hedging strategies proved ineffectual, with 34 percent of respondents not using any hedging strategies. The use of credit default swaps as a preferred strategy dropped 6 percent in 2008 from 2007.
Additional findings include:
· Fewer respondents used leverage to manage their fund in 2008 compared to 2007. Out of those who did, 49 percent plan to use less in 2009.
· More than half of the survey respondents believe the recession will stretch through at least the first half of 2009, while 35 percent think it will extend through the end of 2009, making it the longest on record since 1933.
· Heading into 2009 the appetite for primary deals has shrunk, with approximately 10 percent of respondents planning to allocate 10 percent or less to the primary.
Speaking at the conference Michael Reilly, co-leader of Bingham McCutchen's global financial restructuring group said, "This in-depth report confirms what we have been seeing over the past six months. Liquidity in the market is scarce and we are experiencing an unprecedented rise in default rates. As companies are unable to refinance their current debt obligations, the market is already full of restructurings and liquidations, with many more to come in 2009. A good number in the distressed investing community view the downturn as an opportunity and expect to take advantage in 2009, through an increase in distressed investing, including increased distressed M&A activity and DIP financing -- provided they have their own cash to finance it without outside leverage. This is a very interesting and dynamic time for distressed investors and legal and financial professionals who service them."
DeLain Gray, practice leader of FTI Consulting, Inc.'s Corporate Finance/Restructuring segment adds, "The impact of the economic crisis was felt beyond just distressed debt investors, as 2008 proved to be a humbling year for all investors in the corporate sector. Diversification across industries didn't spare debt investors from losses in 2008, as bouts of selling pressure in debt markets oftentimes seemed indiscriminant. In 2009, we believe that distressed investors will favor sectors like the financial services and automotive industries, as many investors will recognize significant realizable value in sectors' that were heavily impacted in 2008.?
"We are in the very early stages of a distressed investing cycle that may ultimately be remembered for its unprecedented level of corporate defaults and bankruptcies across all industries," said Michael Bruder, Managing Director and Head of New York Restructuring and Special Situations Group at Macquarie Capital (USA) Inc. "And it may also be remembered for the exceptional buying opportunities for those astute distressed investors that are able to navigate these volatile markets."
For the full report, please visit
www.mergermarket.com/pdf/Distressed_Debt_Outlook_2009.pdf.
About Debtwire
Debtwire publishes real-time news and data for financial professionals in fixed income markets across the world. Debtwire is part of the Mergermarket Group, a division of the Financial Times Group, publisher of the Financial Times newspaper and FT.com. The FT Group is a division of Pearson plc, the international media group.
Debtwire ABS publishes news and data on the distressed asset-backed securities market, including secondary trading, collateral trends and significant developments that impact the performance of securitizations, such as breached triggers, servicer bankruptcies, legal/regulatory developments and restructurings. Debtwire is part of the Mergermarket Group, a division of the Financial Times Group, publisher of the Financial Times newspaper and FT.com. The FT Group is a division of Pearson plc, the international media group.
About Bingham McCutchen LLP
Bingham McCutchen LLP - www.bingham.com - is a global law firm with approximately 1,000 attorneys in 13 offices. The firm represents clients in securities and investment law and regulation, cross-border restructurings and insolvencies, high-stakes litigation, complex financing and financial regulatory matters, government affairs, and a wide variety of sophisticated corporate and technology transactions.
About FTI Consulting, Inc.
FTI Consulting, Inc. is a global business advisory firm dedicated to helping organizations protect and enhance enterprise value in an increasingly complex legal, regulatory and economic environment. With more than 3,000 employees located in most major business centers in the world, we work closely with clients every day to anticipate, illuminate, and overcome complex business challenges in areas such as investigations, litigation, mergers and acquisitions, regulatory issues, reputation management and restructuring. More information can be found at www.fticonsulting.com.
About Macquarie Capital (USA) Inc
Macquarie Group (Macquarie) is a diversified global provider of banking, financial, advisory, investment and funds management services. Macquarie acts on behalf of institutional, corporate and retail clients and counterparties around the world. Macquarie's Restructuring and Special Situations (RASS) Group combines the focus, flexibility and specialization of a client-focused restructuring business with the strength and resources of a global platform. By drawing on Macquarie's diverse range of capabilities and clients, MRSS is able to deliver broader and more innovative solution sets to clients, with a uniquely integrated combination of special situations expertise, funds and advisory businesses.
Debtwire
Hannah Bagshawe, 646-378-3177 / +44 (0) 207 059 6118
Head of Communications
hannah.bagshawe@mergermarket.com
or
Bingham McCutchen LLP
Claire Papanastasiou, 617-416-3377
Senior Communications Manager
claire.p@bingham.com
or
FTI Consulting, Inc.
Aisling Garvey, 212-850-5613
Senior Vice President
Aisling.Garvey@fd.com
or
Macquarie Capital (USA) Inc
Paula Chirhart, 212-231-1239
Corporate Communications, Macquarie Group
paula.chirhart@macquarie.com 
