Tinkering whilst debt burns

September 29, 2009

What have Liverpool Football Club, French building materials firm Materis and German forklift truck maker Kion got in common?

They have all been beneficiaries of European banks’ preference to tinker with company balance sheets rather than fundamentally restructure indebted businesses, one speaker said at this week’s restructuring summit.

However, such easy conditions — primarily because banks are reluctant to take big hits on their balance sheets — will not last long if banks’ balance sheets continue to strengthen, speakers said.

“Come the new year there will be a new spate of companies being allowed to go to the wall,” Blackstone’s Simon Davies said.

Tony Lomas, who heads the business recovery services group at PricewaterhouseCoopers, said many companies would need to go back to their banks for restructuring.

“I cannot see an upturn in the UK, Europe or the world that will be quick enough or healthy enough to sort these problems out,” he said.

No comments so far

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/