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By Jonathan Keehner and Jeffrey McCracken - Dec 22, 2011 12:01 AM ET
For bankers advising Europe’s lenders on debt negotiations with the Greek government or the bankruptcy of MF Global Holdings Ltd. (MF), it’s starting to feel like the aftermath of the financial crisis all over again.
After a dearth of assignments in the industry for much of 2011, turnaround advisers at Blackstone Group LP (BX), Moelis & Co. and Lazard Ltd. (LAZ) say they have the heaviest workload since the credit freeze that followed the collapse of Lehman Brothers Holdings Inc. in 2008.
“We’re starting to get very busy,” said William Derrough, co-head of restructuring at New York-based Moelis, which is advising bankrupt shipping company General Maritime Corp. “This time, we’re dealing with broader issues, like the contraction of credit in Europe and a lackluster U.S. economy.”
Concern about global growth and the sovereign debt crisis in Europe has curbed investor appetite for risky securities, limiting options for speculative-grade companies looking to refinance their borrowings. Moody’s Investors Service predicts the global default rate on high-yield debt may climb to 2.4 percent by November 2012 from a projected 1.7 percent at year- end after junk-rated debt sales slumped in the second half.
In the past two months, MF Global filed the eighth-largest bankruptcy in U.S. history, while American Airlines owner AMR Corp. (AMR) sought protection from creditors. MF is being advised by Evercore Partners Inc. (EVR), and AMR is working with Rothschild. A group of more than 450 financial institutions is negotiating terms of a voluntary debt restructuring with Greece.
‘So Expensive’
“Highly leveraged businesses across all sectors find it increasingly difficult to raise debt capital at all, and even if they can, pricing often is so expensive that it worsens rather than fixes the problem,” said Marc Puntus, co-head of restructuring for boutique investment bank Centerview Partners LLP, which started a restructuring practice in July.
The extra yield investors demand to hold speculative-grade bonds rather than U.S. government debt has climbed 1.96 percentage points since the end of July to 7.54 percentage points as of Dec. 20, according to the Bank of America Merrill Lynch U.S. High Yield Master II index. The spread reached 9.1 percentage points on Oct. 4, the highest level since September 2009.
Hawker Beechcraft Corp., a jet maker that has posted annual losses since 2008, said Dec. 12 it is seeking an amendment to the terms of its revolving credit line and hired Perella Weinberg Partners LP. Business would have to improve for the company to refinance at “reasonable rates,” Christopher DeNicolo, an analyst at Standard & Poor’s in New York, said this month.
Newspaper Bankruptcy
Lee Enterprises Inc., owner of the St. Louis Post-Dispatch and 47 other daily U.S. newspapers, filed for protection from creditors on Dec. 12 to modify and extend the maturity of notes with a 9.05 percent interest rate coming due in April 2012. The publisher said earlier this year it was seeking to refinance its debt.
read more Debt Squeeze Points to Biggest Restructuring Wave Since Lehman - Bloomberg
For bankers advising Europe’s lenders on debt negotiations with the Greek government or the bankruptcy of MF Global Holdings Ltd. (MF), it’s starting to feel like the aftermath of the financial crisis all over again.
After a dearth of assignments in the industry for much of 2011, turnaround advisers at Blackstone Group LP (BX), Moelis & Co. and Lazard Ltd. (LAZ) say they have the heaviest workload since the credit freeze that followed the collapse of Lehman Brothers Holdings Inc. in 2008.
“We’re starting to get very busy,” said William Derrough, co-head of restructuring at New York-based Moelis, which is advising bankrupt shipping company General Maritime Corp. “This time, we’re dealing with broader issues, like the contraction of credit in Europe and a lackluster U.S. economy.”
Concern about global growth and the sovereign debt crisis in Europe has curbed investor appetite for risky securities, limiting options for speculative-grade companies looking to refinance their borrowings. Moody’s Investors Service predicts the global default rate on high-yield debt may climb to 2.4 percent by November 2012 from a projected 1.7 percent at year- end after junk-rated debt sales slumped in the second half.
In the past two months, MF Global filed the eighth-largest bankruptcy in U.S. history, while American Airlines owner AMR Corp. (AMR) sought protection from creditors. MF is being advised by Evercore Partners Inc. (EVR), and AMR is working with Rothschild. A group of more than 450 financial institutions is negotiating terms of a voluntary debt restructuring with Greece.
‘So Expensive’
“Highly leveraged businesses across all sectors find it increasingly difficult to raise debt capital at all, and even if they can, pricing often is so expensive that it worsens rather than fixes the problem,” said Marc Puntus, co-head of restructuring for boutique investment bank Centerview Partners LLP, which started a restructuring practice in July.
The extra yield investors demand to hold speculative-grade bonds rather than U.S. government debt has climbed 1.96 percentage points since the end of July to 7.54 percentage points as of Dec. 20, according to the Bank of America Merrill Lynch U.S. High Yield Master II index. The spread reached 9.1 percentage points on Oct. 4, the highest level since September 2009.
Hawker Beechcraft Corp., a jet maker that has posted annual losses since 2008, said Dec. 12 it is seeking an amendment to the terms of its revolving credit line and hired Perella Weinberg Partners LP. Business would have to improve for the company to refinance at “reasonable rates,” Christopher DeNicolo, an analyst at Standard & Poor’s in New York, said this month.
Newspaper Bankruptcy
Lee Enterprises Inc., owner of the St. Louis Post-Dispatch and 47 other daily U.S. newspapers, filed for protection from creditors on Dec. 12 to modify and extend the maturity of notes with a 9.05 percent interest rate coming due in April 2012. The publisher said earlier this year it was seeking to refinance its debt.
read more Debt Squeeze Points to Biggest Restructuring Wave Since Lehman - Bloomberg
