What is an asset worth if no-one wants to buy?
Valuation issues mean extra work for financial advisers as they try to restructure the debts of struggling European companies.
With few bidders for companies — as specialist distressed investors continue to sit on their hands — many company valuations are “subjective”, one restructuring expert told me earlier today.
Such uncertainties have serious consequences. An argument has broken out between different groups of creditors to car cleaning firm IMO Car Wash, as senior lenders seek to take control of the company via a debt-for-equity swap.
Senior lenders believe the company — which has more than 300 million pounds of borrowings — is worth less than the debt they are owed, meaning they plan to take control of IMO with the debts of lower-ranked creditors completely written off.
If the Junior lenders truly think the company is worth more than the senior debt they should pay off the senior debtors and take the entire company.