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.
This is all positive news for healthy credits and investment, but too upbeat for those focused in distressed investing. In addition, the Tax Cuts and Jobs Act of 2017 seems poised to provide additional fuel for economic growth, although none of us will know the actual economic impact of the law for at least a year.
Distressed investors can count on industry structural changes, if not the popping of occasional industry bubbles. There likely will be no “tulip mania” this year, as there was in 1637, but structural changes will continue to abound in retail, restaurants, grocery, paper, healthcare, and international shipping. Opportunities are not unlimited, but they are available to the insightful. To that end, this edition of the JCR provides insights to those actively involved in distressed investing.
The articles in this special edition of the Journal demonstrate the expansiveness of distressed investing as well as strategies used by distressed investors to realize a return on capital. The articles have been written by some of the leaders in the legal and financial industry, and make this JCR edition a true “keeper.”
Our first distressed investing article comes from Jay Goffman and George Howard of Skadden; they provide an analysis of the growing and important use of rights offerings in bankruptcy. Next up are Israel Shaked and Brad Orelowitz, who explain critically important valuation issues specific to distressed investing. We then turn to an article written by Josh Sussberg and Matt Fagen, who explain how retailers can survive a Chapter 11 process, which, as we have seen this past year, is not easy and is generally the exception to the rule. Finally, Levi Winn discusses how “downside distressed investing” can maximize returns to mezzanine lenders.
I want to thank all of our distinguished authors for their outstanding articles that, in the aggregate, demonstrate the breadth and importance of distressed investing.
It has been my pleasure and honor to work with the TMA leadership and these authors in developing a first-rate edition of the JCR that provides insights into distressed investing while also providing practical and strategic advice to those who are interested in distressed investing. Finally, I encourage all those who are interested in distressed investing to attend TMA’s can’t miss 2018 Distressed Investing Conference in Las Vegas February 7-9 for superb education programs and networking events. See you there!