Unstructured Finance

Four Seasons (or more) of restructuring

A woman looks at the 2009 artwork "Sixty Watches" by Austrian artist Michael Schuster at the Art Basel art fair June 9, 2009. The Art Basel runs from June 10 to 14. REUTERS/Arnd Wiegmann (SWITZERLAND ENTERTAINMENT)Restructuring a company’s debts is not a simple process. Unlike acquisition deals, when everyone around the table has something to gain, a restructuring requires everyone to agree to lose something.

Pain has to be shared but everyone has an interest in ensuring someone else takes more of that pain.

As a result, the larger and more complex a company’s debt structure, the more likely it is that restructuring the company’s debt will be a long and difficult process.

These are facts the management at British care home company Four Seasons Healthcare know all too well.

The company found itself loaded up with around 1.4 billion pounds of debt, split across 11 tranches and more than 30 lenders, via an ambitious securitisation at the top of the market in 2006.

What is an asset worth if no-one wants to buy?

car-washValuation 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.

Omaha bowling alley seeks a bargain; no one likely fooled

Chops BowlingOmaha, Nebraska is always a beehive of activity when devotees flock here for the annual meeting of billionaire Warren Buffett’s Berkshire Hathaway.

Shops and restaurants were doing a brisk trade on Friday. Waiters at La Buvette Grocery and Wine Bar, a bistro in the gentrified old market area, said this week-end is always one of the busiest of the year. The rest of Omaha’s old market was also jamming.

At least one vendor — this one on the outskirts of the city — was looking for more than a good day’s business.

“The He-Man of the recession”

Children's character Postman Pat poses outside Buckingham Palace in central London

As anti-capitalists, environmentalists, anti-war campaigners and others protested in the City of London to mark what they dubbed “Financial Fools’ Day”, the lobby group for Britain’s much-maligned private equity industry spied an opportunity to contrast the mayhem with their own activities.

It’s hard to tell just how far the BVCA‘s metaphorical tongue was in its cheek with this OTT press release, prompted by the protests and the “pre-pack sale” of the owner to the rights of some British kids’ TV characters, including He-Man and Postman Pat (pictured).

Still they insisted it was not an April fool, even as they billed private equity a possible “He-Man of the recession”. With this kind of deft “brand repositioning”, surely it won’t be long before Britons warm to the buyout houses. Full release in all its glory below:

Distressed investors say TGIF

Roman Catholics have fish Fridays. Boxing fans have Friday Night Fights. For distressed investors, like Jon Winick, president of Clark Street Capital, there’s Friday night Failure. 
 
“You can count on Friday failures for the next six to twelve months,” Winick said at a distressed investing conference in New York this week. He forecasts bank failures to rise to 200 through next year.
 
There have been 14 bank failures so far this year, according to the Federal Deposit Insurance Corp, with filings every Friday since Jan. 16 after the year end and New Year’s Day holidays.
    
The FDIC seized 25 banks last year. In just the first seven weeks of 2009, the 14 bank failures mean the FDIC is on pace to close more than 100 banks in 2009.
     
Distressed investors say they are expecting a record wave of bankruptcies this year, marking unprecedented opportunity for investors and a feeding frenzy on Fridays. The filings on Fridays are procedural, as the FDIC posts the failures at the end of the week. That allows the declaring bank to give regulators the weekend to sort things out, and it prevents a big run on the bank because branches are closed.
 
Brad Hunter, national director of consulting at Metrostudy, a housing industry research firm, thinks things are just getting started. He said bank takeovers ultimately could exceed 1,000. 
 
“Option ARM loans are coming due, and that will trigger another wave of foreclosure,” he said.

Doom and glee in bankruptcy

Top-class bankruptcy lawyers, vulture investors and credit experts revealed a range of emotions at a bankruptcy conference on Thursday, from doom and gloom to subdued confidence, but some comments bordered on outright glee.

Reflecting on the prospects for distressed investing opportunities this year, Michael Psaros, managing partner at KPS Capital Partners, was blunt.

“We are going to invest an awful lot of money this year,” Psaros said, during a Dow Jones restructuring and turnaround conference in New York. “We’re just very excited about this year and next.”

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