The middle market is in the midst of a 10-year M&A bull market characterized by increasingly high transaction multiples, rising leverage levels, and rapid growth in credit assets under management (AUM) from non-bank lenders. Despite the present optimism, it is not difficult to imagine how an unexpected economic setback combined with these characteristics could result in a perfect storm—a potentially severe and far-reaching credit correction across the middle market and possibly beyond, into other asset classes.
Are we headed for choppy waters, and if so, what can companies,...
A troubled company often reflexively perceives a bankruptcy filing as the prototype solution to its financial distress. Bankruptcy is an important and powerful tool to address insolvency—providing for an automatic stay, the sale of assets free and clear, confirmation of a plan over the objection of creditors, and discharge of debts.
A bankruptcy, however, has several limitations, including significant time and expense. Bankruptcy also frequently results in a sale or liquidation, as opposed to reorganization, and may involve protracted litigation. These drawbacks often render...
Last year more than 20 national retail chains filed for bankruptcy protection, continuing a trend that many observers attribute to the rise of e-commerce and the unprecedented growth of Amazon. While the impact of those forces certainly cannot be denied, the history of retail is also one marked by disruptive change, as new forms of retailing evolve and technology places increasing power in the hands of consumers.
I believe changes over the last decade have centered around speed—among them the speed to market in sourcing, the speed with which retailers can communicate with consumers...
Six out of every 10 businesses are experiencing the same or higher levels of losses to online fraud compared with a year ago, according to “The 2018 Global Fraud and Identity Report” from Experian. Fraud was cited as a growing concern by 72 percent of businesses that participated in the study. Bankrupt companies are also three times more likely to be cited for fraud by U.S. regulators, according to a study from Deloitte Financial Advisory Services LLP. That study indicated companies that experience fraud are much more likely than those that do not to land in Bankruptcy Court.
Despite the strong stock market performance and the low interest rate environment, financial distress, as measured by the number of Chapter 11 bankruptcy filings, is gradually increasing in both general Chapter 11 and real estate. The exception to this “gradual” increase is in healthcare, which has seen filings spike to record-high numbers filings over the past two years, as documented in the Polsinelli/TrBk Distress Indices.
Some reasons for the increased distress in healthcare are obvious, such as those related to a new regulatory and economic environment created under “Obamacare...
The positive economic climate seen around much of the world is a mixed blessing for restructuring and turnaround professionals. We continue to see signs of growth from investment in infrastructure and energy, consumer spending, job creation, and asset value appreciation, all without the inflation and interest rate increases that typically accompany this climate. Sectors such as retail are facing continued challenges from disruption to their business models, but in general distressed companies of late have arisen from more isolated issues or unfortunate events than from systemic, sector-...
Distressed investing has been strong since the collapse of the financial markets in 2008, but as the economy has continued to expand, it has become increasingly opportunistic. It appears that the U.S. economy, which is heading into its ninth year of expansion, will continue to expand, with low interest and inflation rates, consumer spending growing at approximately 2.5 percent, low unemployment with high job growth that is bringing the United States to the verge of structurally full employment, and real GDP growth at around 2.3 percent.
Someone once joked that economists were created to make weather forecasters look good. Unfortunately, these days, it’s tough to say who’s doing a better job.
A little over a year ago, the Organization for Economic Co-operation and Development (OECD) encouraged global economies to pursue a “resilient recovery” from the economic downturn. Expectations were that the recovery would still take time, but that improved results in the U.S. (particularly after a rough winter) could counteract risks from moderating growth in China and other emerging markets. Expectations for global GDP growth...
When I was asked to serve as guest editor for JCR’s energy-focused edition last year, in trying to cover a breadth of developing trends across the industry we asked authors to focus on the investor and considerations that were important in making the investment decision.
Since that time, the energy world has fundamentally changed. The decline in crude from the high $80s per barrel to the low $40s per barrel is driving a shakeout in the oil business of a magnitude that hasn’t been seen since the mid-1980s. While production volumes continue their surge, drilling programs are...
Even though default rates and corporate Chapter 11 filings remain at historic lows, a number of industries have been experiencing financial distress, including oil and gas, retail, higher education, and food processing. Hot topics affecting restructurings in all industries include potential limits on credit bidding, gifting, and other mechanisms to circumvent the priority scheme established under the U.S. Bankruptcy Code and the Section 546(e) safe harbor. Therefore, we have assembled a distinguished panel of authors to discuss these three hot topics and these four hot industries.
