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Distressed Investors See Turmoil As Opportunity, says Firm Survey
October 7, 2008
While an overwhelming 91% of respondents believe there are even more write-downs coming from elite banks, survey respondents suggest there is a silver lining in the midst of this spiralling economic crisis.
New York, (OCTOBER 7, 2008) -- At a time when US distressed debt investors are finally vindicated, Bracewell & Giuliani LLP commissioned Debtwire to survey 100 fund managers, prop and trading desks regarding their investment strategies in the distressed debt market. With such doom and gloom surrounding Wall Street, Debtwire's survey predicts distressed deals will increase.
As the credit crunch enters its second year, amid spiking default rates and widening systemic risk, this report aims to uncover how distressed investors plan to capitalize on the increasingly rough waters. "While the outside world can sometimes perceive distressed debt investors as pure play vultures, these folks will play a pivotal and critical role rebuilding the economic security of our country," said Evan Flaschen, Head of Bracewell's Financial Restructuring Group.
For a PDF of the report go to: www.debtwire.com
Key findings from the survey include:
* More than half of respondents predict that distressed debt supply will outstrip demand in the upcoming year as battered investors assess their risk appetite. As a direct result, the majority of respondents expect distressed debt to become even cheaper than current levels, creating even more of a buyers market.
* Structured credit deals spotlighting RMBS are dead according to respondents, but 45% of respondents believe that CLOs and other CDOs will make a comeback at some point in the future.
* Leverage is the most important covenant in new deals. That's what an overwhelming 71% of respondents say, representing a 50% increase over last year.
Additional findings include:
* A clear majority, 54%, expect some sort of calamity to befall the major monoclines despite their recent round of capital raising.
* 43% of respondents said they typically hold a distressed debt investment for one to two years.
* 50% of respondents expect to see an increase in the number of busted or renegotiated private equity financings.