Wall Street braces for wave of corporate bankruptcies


“The headwinds we experienced in our restructuring activity in 2021 have eased,” PJT CEO Paul Taubman said on a conference call last week. “We are certainly seeing an increase in stress in the system and we are seeing companies having more difficulty refinancing themselves. We find that companies are more nervous about their business prospects. »

Nervous companies probably include the more than 100 on S&P Global’s “restructuring watch” list. It includes fitness outfit Equinox and cosmetics giant Revlon, whose debt burden is described by S&P as “unsustainable”.

With growing prospects that some or more of these companies will end up in bankruptcy court, Baird, an investment bank serving midsize companies, launched a restructuring advisory business last year and hired a former Lazard last month. Also last month, law firm Paul Weiss Rifkind Wharton & Garrison hired veteran attorney Kenneth Ziman, who has worked on the bankruptcies of PG&E and MF Global, among others.

“Every boom cycle ends with a credit event that no one predicts,” Ziman said.

Restructuring experts are aware they were burned when they thought their ship arrived two years ago. Reasons for continued caution include the fact that interest rates remain low from historic levels, and many private equity firms and other alternative lenders stand ready to provide capital to distressed borrowers, even if banks are not. Business defaults last month were just 0.29% of loans, according to S&P LCD, the lowest level since November 2007.

Of course, the bankruptcy and restructuring specialists who were recruited in 2007 were ideally positioned for all the work entrusted to them from 2008 onwards.

Houlihan Lokey CEO Scott Beiser said there was “a lot of potential” for increased restructuring work as high corporate debt levels combined with rising interest rates create “a positive framework.

“We clearly see that some bases are increasing,” he said during a call on Tuesday. “They haven’t started to germinate yet.”


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