Alan Holtz (top photo) is a managing director,
and Spencer Ware is a director with AlixPartners.
Both are based in New York. Holtz has more than
25 years of experience advising on all aspects of
financial restructuring to company management
and boards, financial institutions, and creditors’
committees, across a wide variety of industries.
Ware‘s expertise includes bankruptcy preparation
and management, liquidity analysis, and business
planning, and he has provided services to a
diverse range of clients over the past 12 years.
a further chilling on the restructuring
market. Should an economic
recovery result in a dramatic increase
in the volume of M&A transactions,
more restructuring work could follow
when the bottom falls out from the
deals that shouldn’t have been done.
• Monetary policy. As they have since
the 2008 crisis, the Fed’s actions will
dramatically impact the financing
and refinancing markets and thus
the level of restructuring activity. As
interest rates climb, and underwriting
standards become more stringent,
the same pressures that have fueled
middle market bankruptcies will
affect the larger market participants.
• Future changes to bankruptcy law.
Bankruptcy law changes frequently
as a result of Bankruptcy Court
decisions and periodic legislative
action. Many practitioners see
change on the horizon that will
address the current complexion of
the bankruptcy process, specifically
regarding the subject of debt trading.
The American Bankruptcy Institute
(ABI) formed the ABI Commission
to Study the Reform of Chapter 11
and has conducted a series of field
hearings on the subject. Future
changes in bankruptcy law are
inevitable, and their impact on the
restructuring industry depends
on their nature and timing.
It is, of course, difficult to predict
whether restructuring work will come
back soon and come back strong.
Some of the underlying causes of the
slowdown may certainly have more of a
permanent effect on the nature and level
of restructuring work (e.g., changing
bankruptcy laws), but others appear to be
only temporary and related to business
cycles (e.g., strength of the debt markets).
The real answer likely lies in determining
if the pattern of cycles has been forever
disrupted (by government intervention,
for example) or if what the industry is
experiencing now is the new normal.
While restructuring practitioners may
have a little more time on their hands
to ponder this right now, some are
preparing for this to change dramatically.
As one investment banker in the
restructuring field said recently, "More
high yield bonds and leveraged loans
were issued in 2012 and 2013 than ever
before, and a higher percentage of
them are rated lower than ever before.
Historical trends would suggest the
next restructuring cycle, whenever
it begins, is likely to be much deeper
than the last. It's just math." J
1 The focus of this article is the market for "large"
company restructuring, loosely defined as
that of companies with $100 million or more
of debt. Conditions in the small to midsize
market have generally been quite different
during the time period under study.