2 trends in restructuring presented by john doddy partner – debt & capital advisory trends in...

2Trends in Insolvency & Restructuring

Trends in Restructuring

Presented by John DoddyPartner – Debt & Capital Advisory


Contents

Restructurings:

Current Funding Environment

Restructuring Strategies – what's happening in the market

Warning Signs

Outlook


Current Funding Environment

Changing Market Significant movement from high street banks to PE and back again?

Remaining Banks

Lending Funds

Broadhaven Credit Partners

Capital Providers in Ireland

Senior and Subordinated Debt and PE is now available to support transactions

Long Term Players Banks

Lending Funds

Private Equity

Private Equity

Loan Sales

Trends in Insolvency & Restructuring 17

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Positive Domestic trends

Values are recovering, confidence has improved

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Global Risk Remain

Managing balance sheet risk remains key

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8

Effect On Restructuring Strategies

Trends in Insolvency & Restructuring


Effective restructuring generates activity…..

New Money –

3rd Party Investors

New Money –

Existing Stakeholder(s)

No New Money –

ExistingStakeholders

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Bank Restructuring – Parked Debt

"In the Money" Debt

"Parked" Debt

10

20

30

40

50€m

Asset Value

Implications?

• Asset values recovering means secured creditor can recover all or most of the parked debt

• Debt levels still not refinanceable on a senior debt for senior debt basis

• Separation of the property debt from the trading business not achieved

• Capital structure remains broken, significant balance sheet risk remains

• No recovery in equity value for borrower so no trigger for consolidation

• However personal recourse is avoided

Parked debt allows the secured creditor to recover value but prevents real growth

Current trends…..


Asset Value

Return

10

20

30

40

50

€m

Investor Return

Portfolio Acquirers – Recovery Target

Asset Value

Implications?

• Refinance early in the cycle is difficult to achieve as target value is above current market value

• Asset values recovering means investor returns are being realised after hold period

• Consensual handover of the asset with agreement on recourse

• Generating market activity in certain asset classes e.g. CRE, pubs and hotels

Expect more activity over next 2 – 3 years as Portfolio Acquirers divest

Current trends contd..


12

Warning Signs & Outlook



Warning signs

For trading businesses

Significant number of SME’s yet to de-risk their balance sheets

Chasing P&L profitability without considering

cashflow implications

Owner manager resistance to taking on

3rd party equity

Access to WC and Capex funding is restricted if debt stack is not right

sized

Inefficient borrowing and security structures

remain in place

Tired and/or unsophisticated

management teams /

Succession Planning

Lack of scale – smaller companies will continue

to find it difficult to access capital

http://www.google.ie/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0CAcQjRxqFQoTCI-DsIyMjsgCFUgDGgodStADzg&url=http://kazan-tiande.ru/detoks-po-vsem-pravilam/zavershayushhij-e-tap-programmy-detoksikatsii/&psig=AFQjCNHwknwjA9TKzojhBA4IYqQSofUvgA&ust=1443129934376272


Outlook

Consolidation will accelerate as smaller companies struggle to access capital

Overtrading will force further restructuring

Companies that recapitalise will have a competitive advantage

Increased availability of debt and equity should

drive activity

Parked debt is effective for recovering property debt, less effective for

trading businesses

Zombie companies are not good for any of the

stakeholders

Managing balance sheet risk is key to achieving

sustainable stakeholder value

15

Trends in Restructuring

Presented by John DoddyPartner – Debt & Capital Advisory


2 trends in restructuring presented by john doddy partner – debt & capital advisory trends in...

Documents

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insolvency restructuring22

insolvency restructuring23

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subordinated debt

property debt

debt stack