In zombie films, the dead walk the earth and slowly annihilate the living. Such a frightening prospect may be in store for Europe, the Reuters Restructuring Summit was told.Banks are one of the big problems, speakers said, as they are unwilling to take the size of write-downs necessary to cut firms’ debts down to a manageable size.Firms owned by private equity, particularly the number two or three in their sector, are particularly at risk of becoming zombie companies because of their high debt levels and the lack of interest in such firms from equity investors, Simon Parry-Wingfield of Morgan Stanley said.This may offer opportunities for distressed M&A, he said.”The corporate world is beginning to see an opportunity … to pick up middle-market companies or sponsored companies which are stuck in a zombie world because of their balance sheets,” he said.Those firms unable to attract new buyers or investors will be forced back into restructuring talks with lenders, he said, but their long-term future may not be bright.”People are putting off the problem and the longer it takes to address operational issues, the harder and more expensive it is to fix them,” he said.
LONDON (Reuters) – The administrator of Lehman Brothers in Europe expects to claim more than $200 billion from other parts of the failed investment bank, he told the Reuters Restructuring Summit on Monday.
Tony Lomas, chairman of business recovery services at PricewaterhouseCoopers, said more than $150 billion of claims will be made against Lehman Brothers’ U.S. parent <LEHMQ.PK> and subsidiaries, in addition to more than $50 billion from other Lehman units across the world.
Veteran insolvency expert Nick Hood gave the restructuring summit a sobering reminder of the shortcomings of corporate finance.”Every time we have a recession I sit down with the head of workout for bank clients and ask what banks are going to learn,” said Hood, who first qualified as an accountant in 1970.”Absolutely nothing” was their response when asked during the last recession in the early 1990s, Hood said.”Within three years, they said, there will be high loan to value (ratios) on commercial property, covenants will be loosened and lo and behold it happened … the odds are against any learning,” he said.He explained: “What happens is when the cycle turns, everybody’s gone — they are rich, retired and gone.”To make things worse, Hood told the summit, there is a global shortage of turnaround specialists.
Kraft’s bid for UK confectionary company Cadbury continues to generate headlines. And given the personalities involved, this should not be a surprise. Some of London’s top rainmakers are set to square up against a superstar of the 1980s merger era, Reuters’ Victoria Howley notes.And here’s a round-up of deal-related stories from Thursday’s press:* Volkswagen is considering overhauling its trucks business in a move that could herald a tie-up with German truckmaking and engineering group MAN AG, the Financial Times said. Reuters story here.* Twitter is closing a round of funding that will value the company known for its 140-character, stream-of-consciousness blogs at $1 billion, technology news site TechCrunch said.* British Airways is interested in rival UK airline bmi and has spoken with bmi’s German owner Lufthansa, BA’s chief executive told the London Evening Standard.* Steel-to-property conglomerate CITIC Pacific Ltd aims to list in China, joining other Hong Kong-listed top Chinese firms that would like to list in their home market, media reports said.For the latest Reuters deals news, click here.
Shares in Sprint Nextel have soared on talk that Deutsche Telekom may make an offer to buy the company. But the high cost of any deal, combined with the technological challenges, suggest the German company may be better off considering a joint venture rather than a bid, our commentary team say.The high price of staying competitive in the U.S. market makes the decision on Sprint a tough call for Deutsche Telekom, analysts say.And here’s a round-up of deal-related stories from Tuesday’s press:* The U.S. government is talking to Citigroup Inc about how to sell the roughly one-third stake the government acquired as part of its bailout of the bank, Bloomberg said. Reuters story here.* India’s largest power producer, state-run NTPC Ltd, is looking to spend up to $1 billion to acquire a South African coal mining firm, the Mint newspaper said. Reuters story here.* Brazilian billionaire Andre Esteves plans an initial public offering for his BTG Pactual investment bank in 2010, Valor Economico newspaper said, without citing a source for the information.* RSA, the UK general insurance group, is looking at large acquisitions potentially worth about 600 million pounds ($994 million), that might need to be supported with a rights issue, the Financial Times said.For the latest Reuters deals news, click here.
A year on from the collapse of Lehman the newspapers are full of stories reflecting on the bank’s failure. A senior Bank of England official said he was “astounded” the U.S. government let the bank fall, but some might be more shocked by the rapid bounce-back of the stock markets, which is helping big M&A deals come down the pipeline.For the latest Reuters deals news, click here.And here’s a round-up of deal-related stories from Monday’s press:* French Economy Minister Christine Lagarde plans to extend billions of euros of loan guarantees to France’s top banks for another year, and is calling on them to provide action plans on financing the economy, Les Echos reported.* Tony O’Reilly is ready to give up his controlling stake in debt-laden Independent News & Media, following months of restructuring discussions. As part of a wider plan, bondholders will take cash and shares ahead of a rights issue, the Times of London reported.* The British Conservative Party is looking at plans to sell shares in Royal Bank of Scotland and Lloyds Banking Group to retail investors, the Financial Times said. Shadow Chancellor George Osborne is examining options to offload government stakes in the two banks, the newspaper said. Reuters story here.* Britain’s Resolution, an acquisition vehicle founded by tycoon Clive Cowdery, may buy a general insurer as part of its plan to shake up European financial services, Chief Executive John Tiner told the Times.
The acquisition of Friends Provident by Resolution is a reminder that financial services deals have not gone away. A steady stream of deals have made headlines in recent weeks.On Thursday an online report said Prudential Financial Inc is in the early stages of talks with KB Financial to sell its South Korean brokerage arm, a deal that could fetch an estimated $680 million. Here’s the Reuters story.Other deal-related stories appearing in the media on Thursday include:State-run miner Coal India Ltd plans to raise up to 60 billion rupees ($1.25 billion) by selling 10 percent of its equity through an initial public offer expected within a year, the Business Standard reported on Thursday.Menswear retailer Trinity, controlled by the parent of Li & Fung, has revived a listing plan and aims to raise at least US$200 million in a Hong Kong IPO before the end of this year, a Hong Kong newspaper reported on Thursday.Insolvent German retailer Arcandor’s former banking unit Valovis has applied for 500 million euros in state guarantees, the Handelsblatt newspaper said.India’s Reliance Industries has exited an Oil and Natural Gas Corp-led consortium that was to bid for a 40 percent stake in an oil field in Venezuela, the Economic Times reported.
Clive Cowdery’s Resolution has won over shareholders of Friends Provident, agreeing to pay 1.86 billion pounds for the British life insurer. Here are some facts about the pair. Whether the move will lead to a wave of consolidation in the sector remains to be seen, though last week the head of rival Standard Life told Reuters that it had no plans to make any deals.Other M&A news today includes:The total value of distressed-debt deals totalled $84.4 billion this year, the Wall Street Journal said, almost double the figure last year. Here’s Reuters’ story.Private equity fund Dubai International Capital and distressed debt investor Oaktree Capital have abandoned plans to team up to restructure the debts of German aluminium firm Almatis, the Financial Times said.India’s GMR group is considering listing its global holding firm on the London Stock Exchange as a step towards building a global asset portfolio worth $10 billion, the Business Standard reported.