14 Mar The Return of Restructuring & Bankruptcies
By: Jonathan Reich, Co-CEO, Reich Brothers, LLC
Bankruptcies, corporate restructuring, and asset monetization are expected to rise with interest rates this year. Forecasters are split whether the Federal Open Market Committee’s (FOMC) mid-March meeting will result in another hike or the voting body will hold off until the next meeting in June.
However, with the Federal Reserve’s plan to gradually increase interest rates in 2016, we’re predicting a rise in restructuring activity and continued pre-negotiated and prepackaged bankruptcies regardless of the FOMC’s vote to raise rates now or in June.
U.S. companies in the energy, retail, and healthcare industries are among the most likely to be affected, according to ABL Advisor’s annual survey, which drew on a pool of 185 restructuring experts, including attorneys, investment bankers, lenders, and financial advisors. Our team—with decades of experience monetizing assets in numerous industries including energy and healthcare—is led by two former practicing bankruptcy attorneys who believe this will be the case. Eighty-six percent of experts cited energy as the industry most likely to face distress in 2016.
Further, the survey suggests that 41 percent of energy companies in distress are expected to restructure through bankruptcy while 26 percent will liquidate through asset sales.
While much depends on how the economy performs this year, the end of near-zero interest rates is likely to signal the end of a seven-year period of dramatically reduced restructuring activity.