SOURCE: The Mergermarket Group

January 25, 2012 09:00 ET

Debtwire Releases the Seventh Annual North American Distressed Debt Market Outlook Survey

All Eyes Are on Europe and Upcoming U.S. Elections; More Than 50% of Respondents Say a New Administration Would Benefit U.S. Economy

NEW YORK, NY--(Marketwire - Jan 25, 2012) - Debtwire, in association with Bingham McCutchen LLP and Macquarie Group, today announced the findings of its seventh annual North American Distressed Debt Market Outlook survey. The survey's findings show that investors are only cautiously optimistic for 2012 despite the recent increase in restructuring headlines and market volatility.

The survey outlines 2012 as a "wait-and-see" period for investors to re-assess risk appetite in a vastly different global environment that is being shaped by a constantly changing political landscape, regulatory changes, and economic instability.

"It is unlikely that defaults will meaningfully increase without an uptick in interest rates or a worsening of economic conditions," according to Mick Solimene, senior managing director, Macquarie Group. "However, given that the European financial crisis remains unresolved and could still result in spill-over effects in the US market, a number of players are increasing their distressed allocations to remain poised to capitalize on new opportunities as they arise."

Investment tools -- changes and conflicting views

According to the report, this year's outlook is polarizing in terms of how investors will allocate their funds. Common shares are considered both the most and least attractive opportunity for distressed investors in 2012 by 37% and 34% of respondents, respectively.

"A relatively equal proportion of respondents think common equities will be the worst, and the best, opportunities for 2012. Can they both be right?" asks Bingham partner Michael Reilly, co-head of the firm's global Financial Restructuring Group. "The contrasting views seem to reflect the risk in the market based on macroeconomic uncertainty, the sovereign debt crisis and short-term political fixes. Bears see the risk that the problems will linger; bulls see the reward in undervalued equities."

Second lien loans jumped from 14% of respondents' favor in 2011 to 32% in 2012. "The improved view toward second liens this year, away from first liens last year, represents a marked shift, and may reflect perceived stability in typical first lien asset coverage at 1-3x EBITDA, and more upside, and risk, for typical second liens at 4X EBITDA and above," explains Bingham partner Ed Smith, co-chair of the firm's Financial Services Area.

Key findings:

  • Over half of respondents (56%) believe the election of a new administration would be more beneficial to the US economy.
  • Financial Services and Real Estate are investors' main targets for investing in 2012
  • Nearly half of respondents expect activist strategies to become more prevalent in 2012

The report, available for download here: http://www.mergermarket.com/pdf/NA_Distressed_Debt_Outlook_2012.pdf, provides an in-depth review of emerging trends in the distressed debt markets, based on the predictions of 100 experienced distressed debt investors throughout North America.

Methodology

Bingham McCutchen LLP and Macquarie Group commissioned Debtwire to interview 100 distressed debt investors, including hedge fund managers, sell-side trading desks and other asset managers on their expectations for the North American distressed debt market in 2012. Interviews were conducted over the telephone in November and December of 2011. Responses were collated by Debtwire, and presented to the commissioning firms in aggregate. This is the seventh year Debtwire has released the study.

About Debtwire

Debtwire North America covers companies in the high yield and leveraged loan markets; providing news on capital raises, ongoing restructurings and post restructuring situations. Our team of experienced financial journalists and analysts identify universes of "stressed," "distressed," Chapter 11 and "post restructuring" companies and projects consisting of large liquid credits as well as below-the-radar middle market deals. We then focus on providing actionable intelligence for readers on the latest advisory engagements, liability management strategies, CDS changes, operational performance and inter-creditor negotiations.

Debtwire complements this coverage with a comprehensive restructuring deals database dating back to 2005 that tracks restructurings with at least $150 million in debt. Committee information, advisors, and debt histories provide a real-time overview of live restructuring situations and new business opportunities.

Contact Information

  • Contact:

    Dara Silverstein
    PR Manager - Americas
    The Mergermarket Group
    Email: Email Contact