Daily News: January 3, 2012

Survey: European Debt Shapes Outlook for Distressed Industries


Corporate restructuring specialists expect technology and energy industries will improve in 2012 while the real estate and retail sectors lag, but a worsening European sovereign debt crisis could be the wrench that squeezes them all, according to the annual Turnaround Management Association (TMA) Trend Watch survey.

Six out of ten respondents to survey of more than 200 members said money center banks with exposure to Europe’s debt are most vulnerable to the crisis, and problems they experience could lead to tighter credit lines for businesses.

Investment banks ranked second based on 34% of responses identifying industries most likely to suffer from Europe’s pain, followed by hedge funds and manufacturing, which each had 20%. Respondents noted various scenarios arising from interdependent global financial markets in which problems that beset one scatter and multiply, such as a declining euro leading to lower demand both domestically and abroad for products from U.S. manufacturers.

“There is likely to be a direct impact on financial institutions, and the trickle-down effect is the fact that liquidity may not be available because banks are going to have problems,” said William Lenhart, CTP, a national director in the business restructuring services arm of BDO Consulting in New York. “All these events are likely to feed into an overall lack of consumer confidence, which will also impact the market.”

While Europe’s troubles cloud prospects for financial institutions, other industries remain suspended in a post-recession malaise felt since late 2007. The top three industries most likely to be distressed in 2012 were identical to last year’s results:

  • Commercial real estate — 41% of responses, down from 64%.

  • Residential real estate — 38%, about the same as last year.

  • Retail — 33%, up from 26% last year.

    To read additional survey results, click here.