2 Trends in Restructuring Presented by John Doddy Partner – Debt & Capital Advisory Trends in...
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Transcript of 2 Trends in Restructuring Presented by John Doddy Partner – Debt & Capital Advisory Trends in...
2Trends in Insolvency & Restructuring
Trends in Restructuring
Presented by John DoddyPartner – Debt & Capital Advisory
3Trends in Insolvency & Restructuring
Contents
Restructurings:
Current Funding Environment
Restructuring Strategies – what's happening in the market
Warning Signs
Outlook
4Trends in Insolvency & Restructuring
Current Funding Environment
Changing Market Significant movement from high street banks to PE and back again?
Remaining Banks
Lending Funds
Broadhaven Credit Partners
Capital Providers in Ireland
Senior and Subordinated Debt and PE is now available to support transactions
Long Term Players Banks
Lending Funds
Private Equity
Private Equity
Loan Sales
Trends in Insolvency & Restructuring 17
Trends in Insolvency & Restructuring 6
Positive Domestic trends
Values are recovering, confidence has improved
Trends in Insolvency & Restructuring 7
Global Risk Remain
Managing balance sheet risk remains key
8
Effect On Restructuring Strategies
Trends in Insolvency & Restructuring
Trends in Insolvency & Restructuring 9
Effective restructuring generates activity…..
New Money –
3rd Party Investors
New Money –
Existing Stakeholder(s)
No New Money –
ExistingStakeholders
Bank Restructuring – Parked Debt
"In the Money" Debt
"Parked" Debt
10
20
30
40
50€m
Asset Value
Implications?
• Asset values recovering means secured creditor can recover all or most of the parked debt
• Debt levels still not refinanceable on a senior debt for senior debt basis
• Separation of the property debt from the trading business not achieved
• Capital structure remains broken, significant balance sheet risk remains
• No recovery in equity value for borrower so no trigger for consolidation
• However personal recourse is avoided
Parked debt allows the secured creditor to recover value but prevents real growth
Current trends…..
Trends in Insolvency & Restructuring 22
Asset Value
Return
10
20
30
40
50
€m
Investor Return
Portfolio Acquirers – Recovery Target
Asset Value
Implications?
• Refinance early in the cycle is difficult to achieve as target value is above current market value
• Asset values recovering means investor returns are being realised after hold period
• Consensual handover of the asset with agreement on recourse
• Generating market activity in certain asset classes e.g. CRE, pubs and hotels
Expect more activity over next 2 – 3 years as Portfolio Acquirers divest
Current trends contd..
Trends in Insolvency & Restructuring 23
12
Warning Signs & Outlook
Trends in Insolvency & Restructuring
Trends in Insolvency & Restructuring 13
Warning signs
For trading businesses
Significant number of SME’s yet to de-risk their balance sheets
Chasing P&L profitability without considering
cashflow implications
Owner manager resistance to taking on
3rd party equity
Access to WC and Capex funding is restricted if debt stack is not right
sized
Inefficient borrowing and security structures
remain in place
Tired and/or unsophisticated
management teams /
Succession Planning
Lack of scale – smaller companies will continue
to find it difficult to access capital
Trends in Insolvency & Restructuring 14
Outlook
Consolidation will accelerate as smaller companies struggle to access capital
Overtrading will force further restructuring
Companies that recapitalise will have a competitive advantage
Increased availability of debt and equity should
drive activity
Parked debt is effective for recovering property debt, less effective for
trading businesses
Zombie companies are not good for any of the
stakeholders
Managing balance sheet risk is key to achieving
sustainable stakeholder value
15
Trends in Restructuring
Presented by John DoddyPartner – Debt & Capital Advisory
Trends in Insolvency & Restructuring