Restructuring Remains Active Despite Slower Workout Activity
Despite a seemingly sanguine market for workouts and restructurings, middle-market companies appear to continue to face issues and the current credit cycle has yet to end, said the investment banking firm of Morgan Joseph TriArtisan LLC.
In its latest Restructuring Quarterly Newsletter, the firm observed that while the larger public and widely syndicated credit markets are fully recovered, that might not be the situation for the middle-market and bank facilities. The report’s view contrasts with early 2012 headlines of historically low leveraged loan default rates and falling volumes of public bankruptcies that would otherwise suggest a slow next couple of years for workouts and restructurings.
Said managing director James D. Decker, who heads the Restructuring Group, “Admittedly, publicly available data in this market is hard to come by, but our own experience of increasing activity in 2011 over 2010 suggests middle-market trends may not be mirroring the macro recovery.”
The report also noted that available data on shared national credits (SNCs), representing at least $20 million in loan commitments held by three or more federally supervised institutions, suggests a slightly different view on the credit market, one, it adds, “that is still in process.”
“There are over $2.5 trillion in SNCs (five times that of the leveraged loan market) and nearly 80% are set to mature prior to the end of 2014,” the report said. “Although the percentage of criticized SNCs has fallen since 2009, they remain well above pre-Lehman levels. Combine these facts with the well documented 2012-2014 end of reinvestment windows of legacy CLOs, which have supported the leveraged loan market, and one might think twice about calling an end to this credit cycle.”
In other developments, Morgan Joseph reported:
Morgan Joseph TriArtisan LLC is an investment bank engaged in providing financial advice, capital raising and private equity investing.