Transatlantic restructuring activity is set to increase in line with refinancing difficulties over the next 12 months, according to a study released by Debtwire in association with Merrill DataSite.
Based on a series of interviews with 125 financial and legal advisers across North America and Europe, the Transatlantic Restructuring Outlook report identifies emerging trends in transatlantic restructuring activity and provides insight into overall market sentiment.
The large majority of respondents (76 per cent) believe debt or liquidity issues will be the primary driver of transatlantic restructurings over the next 12 months.
Additionally, more than half of respondents (52 per cent) believe refinancing debt will prove to be the most difficult aspect of the restructuring process during this period, even more so than negotiating with creditors, financial forecasting, maintaining third-party relationships and complying with regional regulations as banks from all regions may prove unwilling or unable to refinance.
The study also highlights a wide range of regional and sector-specific drivers influencing transatlantic restructuring levels in the coming months, including sovereign debt crises in Southern Europe, lingering distress in the real estate market and companies looming debt maturities.
Respondents also predict an uptick in distressed M&A, as more than half (54 per cent) believe non-core asset sales will be central to most companies restructuring strategies over the next 12 months. Respondents expect to see an especially high volume of restructuring-related asset sales, divestitures and spin-offs in the real estate and financial services sectors.
Companies’ individual restructuring strategies will likely be shaped partly by creditors in the months ahead. In the US and in the UK, the overwhelming majority of respondents expect senior creditors to have a significant influence on borrowers restructuring processes over the next 12 months. Approximately one-half and one-third of respondents expect the same of private equity sponsors and junior creditors, respectively.
The most significant transatlantic restructuring activity will occur in the real estate sector, according to 59 per cent of respondents, followed by the financial services and automotive sectors.
Seventy six per cent of respondents believe North America offers the most favourable regulatory climate for companies in the midst of restructuring while only one-fifth say the same of Western Europe.
A further 57 per cent of respondents believe creditors in North America will be most actively involved in companies restructuring processes, when compared to their European counterparts.
