2016 Holds Opportunities for Resourceful Distressed Investors

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Challenges present opportunities, and there will be many challenges in 2016 providing for creative distressed investment opportunities. The challenges range from rising interest rates and lower commodity prices to geopolitical risks and a global economic slowdown. Some of these challenges will have a greater impact on specific industries, like oil and gas, mining, and retail. For distressed investors with liquidity, creative and strategic guidance, and perhaps a strong constitution, there will be opportunities to generate enviable returns on investment. Our focus in this edition of the JCR is on distressed investing, and we present a broad range of articles that provide a glimpse of what we may see in 2016.

Our issue begins with Dave MacGreevey and Eric Koza at Zolfo Cooper discussing the critical considerations for assessing investment in distressed companies. They take the reader through the process of due diligence, operational integration, and post-closing issues.

We then turn to two related, but separate, articles on the oil and gas industry, which is expected to continue to be a source of opportunities for distressed investors. The first article is by Steve Simms and Albert Conly at FTI Consulting and focuses on the economic state of the oil and gas industry and the impact on the leverage loan market for energy companies. They conclude by predicting the macroeconomic outlook for global energy for 2016.

From this macroeconomic perspective on global energy, we then turn to the microeconomic impact on investors of troubled E&P companies in particular. I am a firm believer that liquidity challenges for companies can lead to significant returns for creative and opportunistic distressed investors. In an article by yours truly, I discuss that while there will be opportunities for distressed investors in E&P companies, those investors must analyze potential risks and uncertainties that can arise in a bankruptcy scenario to help protect their investment.

We next turn to an article on claims trading. Rob Axenrod of CRG Financial focuses on the risks and rewards of bankruptcy claims trading with concrete examples of strategic investment strategies. He shows that the old adage holds true that increased risk leads to potentially increased rewards in this sophisticated arena.

Finally, we conclude with Jay Goffman of Skadden analyzing the high-profile decisions focusing on the Trust Indenture Act issued by the U.S. District Court for the Southern District of New York. He also discusses potential legislative changes and the impact these cases could have for distressed investors.

We concisely cover some timely areas of distressed investing, and on behalf of all of us at the TMA, I hope that you enjoy and find useful this edition of theJCR.

Bradford J. Sandler

Bradford J. Sandler is co-chair of Pachulski Stang Ziehl & Jones’ national Committee Practice Group and maintains a national practice representing debtors, committees, acquirers, and other significant parties in complex reorganizations and financially distressed situations, both in and out of court. He is listed among both “The Best Lawyers in America” and “Delaware Super Lawyers” in bankruptcy and creditor-debtor rights; is ranked among the top bankruptcy attorneys byThe Deal; holds an AV Preeminent Peer Rating from Martindale-Hubbell; and is ranked among Bankruptcy/Restructuring attorneys by Chambers USA.

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