European companies find that the US funds have bought debts at a discount
Several European countries are arguing their testing time since the second world war with the combination of government austerity, economic growth and organized banking stresses. The largest companies of the continent seem flexible to the disorder and confusion. The lenders who are enthusiastic want to finance the valuable blue-chip customers. The bond investors who want to run away from the risks lurking in the debt markets have heaped into high-grade bonds. These bond investors can opt for debt settlement options in order to eliminate their debt problems.
But the outlook is depressing for many small and indebted companies. The head of European restructuring at Goldman Sachs, Andrew Wilkinson has said that the banks are not concerned in engrossing in a debt reorganizing with companies that want to extend and amend but are becoming much more open. According to the experts, the increasing assumptions of rising distress have brought a crowd of US-based suffering debt funds. Their interest is probably to change extensively the dynamics of reorganizing in Europe.
Richard Tett, a partner at Freshfields, the law firm has said that they are now shifting into a new stage. The reorganizations in Europe have been obsessed by the commercial lenders in the past but they have seen rise in the US funds over the past year. The funds have started to snap up the loans of some companies with distressed debt and, as such, many reorganization could become less friendly in future. Though the banks may still want to extend the maturities, the funds do not want to be in the hands of the lenders for a long time and so, have bought debts at a concession.
This enables the banks to promote debt and note down to improve a company’s health or to take companies over in exchange of debt for equity. Though this may be beneficial for many companies in the long run, the violent stances taken by funds may create dismay among the conventional company owners and the bank lenders who may have been eliminated in the process. David Kurtz, the global head of reorganizing at Lazard, the bank guesses that it is going to be a wake-up call. The reorganizations in Europe will become less concordant than they are in the United States. The distressed debt funds of the US have a consistent restructuring surrounding across the home market.
But, it is not the same in case of Europe. Martin Gudgeon who is the head of European restructuring at the Blackstone Group has noted that the different authorities in Europe are making the results unexpected and so, have more ‘out-of-court’ reorganizations. Gina Germano, a partner at Goldbridge Capital Partners, a newly set up fund has argued that this makes an aggressive advancement less feasible in Europe. It is much harder to get paid in Europe. The experts disapprove over the speed at which the European banks will deleverage through selling loans to the third parties. The IMF has estimated recently that the European banks have set to trim the balance sheets by €2tn in the next 18 months.