Bankruptcy decline has advisers scrambling for crumbs of business
A sharp drop in business bankruptcy filings has restructuring advisory firms scrambling for crumbs of business. Some 29 attorneys signed up to pitch their services to the creditors committee of U.S. regional airline Mesa Air Group, which filed for Chapter 11 protection in early January.
Another 17 financial advisers showed up at the so-called beauty pageant, anxious for new business..
“It’s definitely a shift,” said Ed Albert, managing director at Macquarie Capital (USA) Inc, who attended the gathering. “A sea of people is showing up. There are fewer bankruptcy filings, and a lot more restructuring firms were created in the last three years.”
Bankruptcy filings of publicly traded companies dropped by a third in December and January, year to date, compared to the same period last year, according to bankruptcydata.com.
“It’s significant that a lot of firms at Mesa were debtor firms, which typically pursue the bigger debtor cases for bigger fees,” said Albert, who is also co-head of Macquarie’s New York restructuring advisory business.
Albert said an attorney he met at the Mesa pitch told him there were more hopeful hires at Mesa than at auto makers Chrysler or General Motors, which filed for bankruptcy last year. Calls to the Office of the U.S. Trustee to confirm this statistic were not returned.
Reliance aims big with $12 bln bid for LyondellBasell
Ranked by Forbes as India’s richest man with a net worth of $32 billion, Mukesh Ambani is no stranger to taking risks.
The move by conglomerate Reliance Industries, controlled by Ambani, to bid for bankrupt LyondellBasell is a calculated one. Markets seem to think this is a bargain and investors pushed up Reliance’s stock nearly 4 percent on Monday.
If the deal, which sources say may be worth $12 billion, goes through, it would catapult Reliance into the ranks of top petrochemical makers such as Saudi Arabia’s SABIC, Germany’s BASF and Dow Chemical Co.
The bid comes at a time when asset prices have fallen globally in the wake of the economic crisis but there are still some lingering doubts over whether the worst is over for the global economy.
Reliance hasn’t shied away from making mega investments during downturns.
Last December, Reliance commissioned a 580,000 barrels per day refinery next to its existing 660,00 bpd plant in the western Indian state of Gujarat, creating the world’s biggest oil refining complex just as global oil demand began to collapse.
Reliance has a cash pile of $4 billion and $8 billion in treasury stock that can be sold, so funding is unlikely to be an issue for the company, Macquarie said in a research note ahead of the bid. Bank of America Merrill Lynch is among the advisers for Reliance, sources said.
from Commentaries:
Consolidation Air, nobody’s favourite airline
With airlines around the world struggling to survive the economic downturn, the time should be nearing to break the taboo of consolidation in the sector.
Airlines around the globe face losses of $11 billion in 2009, according to IATA. Margins are expected to fall this year and next, with analysts predicting carriers are likely to struggle for years to reach levels needed to produce an acceptable return for capital market investors.
Societe Generale estimated in a recent note that margins would drop to -3.1 percent in 2010 before recovering to 1 percent in 2011, well short of the 10 percent needed.
Effectively we are back to the ice age of 2001-2.
Eight years ago, the collapse of Sabena and Swissair kicked open the door of cross-border consolidation -- within Europe at least. But while deals like Lufthansa's merger with the Swiss airline allowed for some rationalisation, the merged entities remain hamstrung by national aviation regulations.
Replacing this patchwork of national carriers with viable global companies able to withstand economic shocks is the necessary next step.
The European Union's open skies agreement has shown what is possible. It has allowed M&A to take place within the bloc, and this has led to the creation of four major players -- Air France-KLM, British Airways, Lufthansa and Ryanair.
Did the crackdown on illegal workers cost Apollo $76.5 mln?
EuroFresh, a leading producer of greenhouse tomatoes and cucumbers, filed for Chapter 11 bankruptcy protection Tuesday, partly blaming crackdowns on undocumented migrant workers for its woes.
In a bankruptcy filing in Arizona, where it is based, EuroFresh essentially said the government’s actions has raised demand for workers with legal papers, making them scarce.
“The pool of illegal immigrant labor in the area surrounding the Facilities shrank, creating higher overall demand for legal immigrant labor,” the company complained.
One might wonder whether this particular bankruptcy might prompt investors such as Apollo Investment Management, Barclays and JP Morgan, which hold millions of dollars to join the ranks of corporations such as Microsoft urging immigration reform including more visas.
As unsecured creditors, pretty much at the bottom of the totem pole, the three investors stand to lose $76.5 million, $47 million and $35 million respectively because of the bankruptcy.
