SOURCE: AlixPartners

October 17, 2007 08:30 ET

European Default Rates to Increase, Say Vast Majority of Experts in New AlixPartners Survey

SOUTHFIELD, MI--(Marketwire - October 17, 2007) -


--  93% Expect Defaults to Rise; 79% See Corporate Insolvencies Increasing
--  Most See France, Germany and Italy Becoming More Attractive to
    Distressed Investors
    
Is the current global credit crunch going to lead to more corporate debt defaults and insolvencies in Europe? That's certainly what experts in the business foresee. In a survey of nearly 70 leading bankers, lawyers, fund managers and other industry experts from throughout Europe conducted recently by AlixPartners LLP, the global management advisory firm, no less than 93 percent of respondents said they expect to see an increase in debt default rates over the next 18 months, while no less than 79 percent predicted an increase in corporate insolvencies in Europe is on its way. Those numbers are up from 72 percent and 50 percent, respectively, in the same survey -- the AlixPartners European Turnaround Index -- last year.


When asked to rate which of five European key industries is likely to experience the highest rate of restructuring, most experts rated manufacturing the most likely, retail and consumer products second, financial services third, healthcare and pharmaceutical fourth, and energy fifth. However, significantly, all five industries received votes for being "most likely."

When asked to pick which of five Western European countries is most likely to experience the greatest share of corporate restructurings, 38 percent of the #1 votes were cast for Germany, 33 percent for the United Kingdom, 13 percent for France, 12 percent for Spain and 4 percent for Italy -- though all five countries received multiple mentions for second and third place as well.

"Even as its effects so far seem to be more moderate than some initially feared, the global credit crunch ought to be a wake-up call to managements, boards and investors everywhere that, as the old saying goes, 'trees don't grow all the way to the sky' -- that sooner or later good times do come to an end," said Michael Grindfors, chief executive officer of AlixPartners. "What this survey shows is that the experts in the field in Europe, those who know from experience just how fast the cycle can turn, sense that a lot more change could well be afoot. Truly ambitious managements will get out in front of that change -- lest the trees start falling on them."

The survey responses also reflected the effect of recent changes in insolvency laws throughout much of continental Europe. Fifty-six percent said the recent changes will make France a more attractive market for distressed-debt investors, while 54 percent said Italy would become more attractive and 46 percent said Germany would.

"This represents a real change among distressed-debt investors," said Stephen Taylor, a managing director in AlixPartners' London office. "This shows that American and U.K. investors are becoming much more relaxed about tackling distressed situations on the continent -- that that's no longer a scary prospect for them. Today, many countries in continental Europe are competing to be the best place to restructure businesses, and recent insolvency-law changes in France and Italy have put those two countries at the front of that group. Meantime, as Germany now launches a commission to update its own law, I think we can expect that country to be extremely competitive within a year or so as well."

About AlixPartners

AlixPartners is a global restructuring, consulting and financial advisory services firm, with offices in Chicago, Dallas, Detroit, Dusseldorf, London, Los Angeles, Milan, Munich, New York, Paris, San Francisco, Shanghai and Tokyo. It is on the Web at www.alixpartners.com.

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