they believed the sovereign debt crisis
meant there would be no food available.
continued from page 5
I chaired the first panel of the day,
“Trends in Distressed Investing Strategies
in Europe.” Ever since the credit crunch
broke in 2007-2008, funds all over the
world have been stockpiling hundreds
of billions of dollars to spend on
distressed assets, whether individual
loans, portfolios, or equity. But they have
been unable to spend their money.
One problem is the price gap. Hedge
funds and private-equity houses want
to get a good return by buying as
low as they can. On the other hand,
banks are having to rebuild shattered
balance sheets, which often means
they cannot provision at current market
prices and are loathe to crystallise big
losses by selling anywhere near as low
as the funds are prepared to pay.
European forum shopping. His session,
asking “Will European Restructuring
Law Reforms Put an End to U.K.
Scheme Tourism?” was no exception.
Matthias Beck of Ernst & Young (E&Y) in
Germany warned that “the elephant in
the room is the U.K. pensions regulator.”
The result is a continent full of zombie
loans made to zombie companies
and held by zombie banks. Peter
Kroeze of H2 Equity Partners in
Amsterdam pointed out that Basel III
will put pressure on banks to shrink
assets. Will this result in them selling
distressed loans? Perhaps, he said, but
growth in bank sales will be slow.
Several European jurisdictions,
particularly Germany, have recently
introduced new insolvency laws
aimed at making turnarounds easier,
which has been of intense interest to
TMA members. Taylor asked his panel
members whether they thought these
reforms were enough to stem the current
flow of large financial restructurings
from places like Germany and Spain
to London, specifically to use the
English Scheme of Arrangement.
Beck has firsthand experience of the
U.K. state agency created a few years ago
to protect the interests of members of
occupational pension funds connected
to companies that file for insolvency. He
and his colleagues at E&Y were exposed
to the activities of the regulator in the
multinational insolvency of Nortel
Networks, the Canadian-based telecom
company for which they handled the
European side of the administration.
This view was shared by members
of the panel. Davide Arpili, a partner
with PricewaterhouseCoopers in
Madrid, acknowledged that the Spanish
distressed investing market is probably
the hottest in Europe at the moment. But
that is not saying much. There is plenty
of talk, but not much activity. Where
there are real expectations of distressed
sales is in the small and medium-sized business sector, said Arpili.
Adrian Thery of Garrigues in Spain, for
instance, thought that the introduction
of new “hybrid” corporate rescue
instruments in Spain, such as the
Acuerdo de Refinanciación, would not
have been enough to persuade a big
Spanish company like Metrovacesa
to forego using an English scheme
in its recent restructuring.
The U.K. pensions regulator made several
high-profile claims in the insolvency
processes in Canada and the U.S., which
put it at loggerheads with bankruptcy
courts in Toronto and New York. Its
aggressive approach suggests that the
agency must be taken into account
in large multinational turnarounds
and insolvencies in the future.
Céline Domenget Morin of Bremond
& Associés commented that France
remains a debtor-friendly country.
Rescue cultures could be endangered,
however, by ad hoc pieces of legislation
designed to save one company,
which then remain on the statute
books and may have unexpected
consequences for other situations.
More to Come
TMA Europe looks forward to welcoming
you to the inaugural TMA Europe
Distressed Investing Conference in
London on 13 September. For further
details, please visit tma-europe.org T
H.J. Woltery, who heads the German
Desk of Strategic Value Partners,
added that it wasn’t just a matter of
whether banks were prepared to
sell. Investors like him have had to
figure out in which jurisdiction it
would be best to restructure. This has
traditionally been in London, where
English law is user-friendly, but this is
changing. Recent reforms in German
law could make that market more
attractive, Woltery said, presaging
another panel later in the conference
on forum shopping in Europe.
For instance, she said, France passed
a law to help keep the oil refineries
trading at Petroplus. Under the law,
directors’ personal assets could be seized,
even if no proof had been advanced
that they had done anything wrong,
and this is now causing uncertainty
in the turnaround community.
No More ‘Going to London’?
Stephen Taylor of AlixPartners always
holds lively panel discussions, not least
because of his status as the pioneer of
Taylor concluded that “the U.K. shop
still has the advantage in that you can
choose the insolvency practitioner.
Germany has got better, but in France
and Spain, you still have problems.”
John Willcock is the
publisher and editor
of Global Turnaround,
an information source
specialising in large
and complex international cases.
He trained with Lloyds Bank in
the 1980s, worked as a financial
journalist for British newspapers
The Guardian and The Independent
in the 1990s, and founded Global
Turnaround in 2000. He talks
frequently at conferences, including
the TMA, ABI, and INSOL Europe.