Dow Jones Daily Bankruptcy Review and American Bankruptcy Institute Join Forces to Research Corporate Restructuring
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DOW JONES DAILY BANKRUPTCY REVIEW AND AMERICAN BANKRUPTCY INSTITUTE JOIN FORCES TO RESEARCH CORPORATE RESTRUCTURING
New Research Report Assesses Next Wave of Corporate Restructurings, According to Daily Bankruptcy Review’s “New Trend Watch” Publication
November 8, 2006, Alexandria, Va. —Bankruptcy professionals are readying for the next wave of corporate restructurings, which may arrive as early as six months from now, according to the findings of a joint research effort by Dow Jones & Company’s Daily Bankruptcy Review and the American Bankruptcy Institute. The research—assessing the timing, causes and targets of this restructuring wave—was released this week in the first edition of “Trend Watch,” Daily Bankruptcy Review’s newly launched white paper publication, sponsored by Jefferies.
According to the research report, which included a joint survey of 90 restructuring professionals, the majority of respondents (71 percent) believe that the next big wave of corporate restructurings will hit within the next six to 18 months. Eleven percent of the survey respondents see the next wave of corporate bankruptcies taking place within the next six months, while 19 percent figure that the trend will take place 18 months to three years from now.
“What the report shows is that bankruptcy professionals are confident that high levels of borrowing will eventually have repercussions, as sure as night follows day,” said Nick Elliott, managing editor of the Daily Bankruptcy Review. “That’s despite default rates remaining very low and forecasts of a rise in defaults yet to materialize.”
Daily Bankruptcy Review’s “Trend Watch” is only available to subscribers of the daily e-newsletter and members of the American Bankruptcy Institute. In addition to a complete analysis and charts on the research survey’s findings, this first edition also contains a profile of the Peter J. Solomon Company Watch list of publicly traded companies, brief profiles of Standard & Poor’s “weak links” companies and comparisons on the default rate projections of different forecasters.
According to the research report, of the industries most likely to be affected by the next wave of corporate restructurings, 80 percent of respondents thought that the real estate/construction industry was “very” or “extremely” vulnerable to an economic downturn, while more than two-thirds thought that retail would be similarly affected. Other industries seen as very or extremely vulnerable by survey respondents included airlines (67 percent), manufacturing (63 percent) and transportation (49 percent).
Forty-eight percent of the respondents singled out interest rates as the most likely trigger for the next surge in restructurings, with falling home prices (15 percent), higher commodity prices (13 percent), global competition (7 percent) and a bear market for stocks (5 percent) also contributing to the wave.
With regard to the tools that professionals are using to predict whether a company might file for bankruptcy, 54 percent of respondents said that they used operating cash flow as the primary predictor for gauging companies under financial duress. Other tools used by professionals to predict whether a company will undergo a corporate restructuring or file for bankruptcy include the debt-to-EBITDA (earnings before interest, taxes, depreciation and amortization) ratio (49 percent) and bank loan prices (38 percent).
The research report survey was conducted during July. Attorneys accounted for the majority of participants (61 percent), with the balance being distressed-debt investors (15 percent), financial advisors/investment bankers (7 percent) and lenders (5 percent).
Journalists who would
like a copy of the Daily
Bankruptcy Review/American Bankruptcy
Institute joint research survey may contact Michelle Jeffers at (415)
ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes more than 11,500 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org. For additional conference information, visit http://www.abiworld.org/conferences.html.
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