13 replies to this topic

[Insider]

http://www.bloomberg.com/

Looming Crash Prompts Jump in Distressed Debt Hiring

By Kabir Chibber and John Glover

May 30 (Bloomberg) -- The biggest winners from the global buyout boom are hiring distressed-debt bankers in Europe at the fastest pace in five years.

Goldman Sachs Group Inc., the world's most profitable securities firm, hired Andrew Wilkinson, the lawyer who advised creditors in the bankruptcies of Eurotunnel Plc and Parmalat Finanziaria SpA, to help lead its restructuring business in London. Morgan Stanley, the third most-active merger adviser this year behind Citigroup Inc. and Goldman, added seven bankers in the past year, boosting its group to 61. Blackstone Group LP, poised to become the world's largest publicly traded buyout firm, is starting a corporate restructuring group in Europe.

``When the turn does come, it will be unlike anything we have ever seen before,'' said Iain Burnett, 43, managing director of Morgan Stanley's special situations unit in London. ``The scale of it could be considerable because of the size of some of these leveraged deals,'' said Burnett, who began his career in London a month before the October 1987 stock market crash.

Firms are paying as much as $3 million a year for bankers who advise bankrupt companies and for traders who specialize in defaulted debt, according to Heidrick & Struggles International Inc., the world's third-largest recruiting firm. That's on par with derivatives and commodities traders.

Adding Debt

Restructuring groups are growing faster in Europe than in the U.S. as companies in the U.K., France and Germany pile on record amounts of debt, according to Standard & Poor's. European companies borrowed a record $252.6 billion in loans and bonds rated below investment grade, according to data compiled by Bloomberg.

European companies acquired by buyout firms had debt equal to 6.2 times earnings before interest, tax, depreciation and amortization in the first quarter of this year, according to Fitch Ratings. That's up from 5.1 times in 2004 and 4.8 in 2003.

Heidrick & Struggles, based in Chicago, says it's placing more distressed-debt bankers in London than at any time since 2002, after Internet-related companies crashed. So far, there isn't much work to do. Near-record-low defaults have reduced Europe's market for distressed debt to 150 billion euros ($202 billion), a quarter of the size five years ago, according to data compiled by Deutsche Bank AG.

Little to Do

Only one European company -- Teksid SpA, an auto-parts maker based in Turin, Italy -- has defaulted this year, and only four companies worldwide have missed interest payments, according to Moody's Investors Service.

``Banks have to pay market rates to attract quality employees, but the problem is the employee may be sitting on his or her hands for six to 12 months,'' said Lee Thacker, capital markets partner at Heidrick & Struggles in London.

Companies are classified as distressed when they're in default or their bonds yield at least 10 percentage points more than similar-maturity government securities, according to S&P. Traders of distressed debt buy bonds and loans in a bet the securities will appreciate when the company's finances improve. If there's a bankruptcy, they may demand equity in the reorganized company in return for the debt.

European companies almost doubled borrowing this year to $225 billion of loans from the same period in 2006, Bloomberg data show. They sold an additional $27.6 billion of so-called junk bonds, a 30 percent increase from a year earlier. Such debt is rated below Baa3 by Moody's and BBB- by S&P.

Lowest Rates

The riskiest companies, those with a CCC credit rating or worse, are able to get the lowest borrowing rates ever, at 3.3 percentage points over benchmark European government debt, Merrill Lynch & Co. indexes show. The yield gap reached a high of 42.1 percentage points in the month after the terrorist attacks of September 2001.

Risk premiums on U.S. junk-rated corporate bonds yesterday fell to a record 2.42 percentage points more than Treasuries, Merrill indexes show. The spread is half the average of about 5 percentage points over the past five years.

``It's like a hangover, people will wake up and say, `what have I done?''' said Michael Weinstock, who helps manage $3 billion of distressed debt at private equity firm Quadrangle Group LLC in New York. Quadrangle this month hired a second banker to focus on European distressed debt. ``Record-high levels of financing now mean record levels of defaults in the future. There's every reason to believe we're near a market top.''

The ranks of distressed debt bankers in Europe have swelled by about 30 percent to 400 this year, according to London-based financial recruiter Kennedy Associates. Worldwide, there are about 1,500 bankers specializing in debt of troubled companies, including 800 in the U.S. and 300 in Asia, said Jason Kennedy, founder of Kennedy Associates.

European Pace

``The U.S. market is larger and more established,'' said Kennedy, who has hired distressed-debt bankers in London for clients including Goldman, Citigroup and Lehman Brothers Holdings Inc., all based in New York ``Many banks here are just starting to build up their distressed desks.''

Investing in Europe's troubled companies picked up 14 years ago when Frankfurt-based Deutsche Bank hired Martin Dent, followed a year later by Julian Nichols, who is head of distressed debt in Europe for Germany's largest bank. Deutsche Bank, which doubled its distressed-debt staff over three years to about 120 bankers worldwide, more than any other bank, is planning to increase, Nichols said.

``Distressed debt will continue to grow,'' Nichols said. ``As the value of leveraged loans in the market increases, the absolute level of defaulted debt will increase, even if the ratio remains similar to what it is currently.''

Goldman Hires

Goldman last year hired Lachlan Edwards from London-based investment bank NM Rothschild & Sons Ltd. to head its restructuring unit. In March, it brought in Wilkinson, the former managing partner at law firm Cadwalader Wickersham & Taft in New York.

Goldman co-President Gary Cohn said ``the institution that figures out first that the credit environment has changed will be best positioned,'' according to a May 17 note to clients by Jeffery Harte, a Chicago-based analyst for Sandler O'Neill & Partners.

Greenhill & Co., the investment bank established by former Morgan Stanley Group Inc. President Robert Greenhill, hired Martin Lewis, 52, in February from Miller Buckfire & Co., the firm advising bankrupt energy company Calpine Corp. of San Jose, California, and auto-parts maker Dura Automotive Systems Inc. of Rochester Hills, Michigan, on their reorganizations.

Greenhill, chairman and chief executive officer of the New York-based investment bank, said in a release at the time that the hiring was ``in preparation for when the economic cycle turns.''

Ramping Up

ABN Amro Holding NV doubled a group that deals with troubled companies to 20 in the past year, and plans to have 40 in the ``medium term,'' said Boe Pahari, global head of special situations and distressed capital in London for Amsterdam-based ABN Amro, the largest Dutch bank.

New York-based Merrill Lynch in November hired Ben Babcock from Lazard Ltd. to set up a corporate restructuring business in London. Babcock has since added one person dedicated to restructuring and can pull in people from Merrill Lynch's corporate finance business as needed, he said.

BNP Paribas SA, France's biggest bank, hired Steven Franck from New York-based Morgan Stanley this year to increase its distressed debt operation in London to four.

``People have been forecasting a meltdown in credit in the next 12 to 18 months,'' said Michael Gibbons, head of the special situations desk at Paris-based BNP Paribas. ``We tend to crash when we least expect it, rather than when we forecast it.''

Adding Staff

New York-based Blackstone in December hired Close Brothers Group Plc's Martin Gudgeon, who advised creditors of Eurotunnel and the management of Polestar Group, a Milton Keynes, England- based magazine printer that agreed to a $1.6 billion restructuring in December to avoid collapse.

Houlihan Lokey Howard & Zukin, the Los Angeles-based investment bank, employs 20 in Europe for its restructuring business, up from two when it started in 2002. The bank is looking to build a similar group in Asia, according to Joseph W. Swanson, its London-based managing director.

Zurich-based UBS AG, Europe's largest bank by assets, has been adding staff to its distressed-debt business this year, said Doug Morris, a spokesman in New York who declined to provide details.

Jeff French, a spokesman in London for Citigroup, the most active merger adviser this year, declined to comment. JPMorgan Chase & Co. spokeswoman Stefania Signorelli, Credit Suisse spokeswoman Rebecca O'Neill and Lehman Brothers spokeswoman Ruth Lavelle, all reached at their offices in London, also declined to comment.

Apollo Coup

Banks are looking for opportunities like the 2003 takeover of Zurich-based Cablecom AG by Apollo Capital Management LP, along with Goldman and Soros Private Equity Partners. They bought the distressed debt of Switzerland's largest cable TV company, swapped it for equity and in 2005 sold it to John Malone's Liberty Global Inc. for $2.2 billion.

S&P forecasts the default rate, which was 2.3 percent in April, will rise above 2.5 percent by year-end in Europe. In the U.S., the 12-month default rate is 1.4 percent.

``The risk in all of this is that the higher we fly, the further we could fall as and when the market turns,'' said Paul Watters, S&P's London-based director of debt recovery ratings. ``Many borrowers are tacitly acknowledging the growing vulnerability.''


Insider

[da_cheif]

"When the turn does come, it will be unlike anything we have ever seen before "

you got that right........SNORT

http://chart.bigchar.../...S&rand=4606

Edited by da_cheif, 30 May 2007 - 10:27 AM.

[Insider]

"When the turn does come, it will be unlike anything we have ever seen before "

you got that right........SNORT

http://chart.bigchar.../...S&rand=4606

HAHAHA ROTFLMAO!!!

Insider

[Mtrader]

VLNC still on the down trend. It needs to stay here for at least a week to have any significant.

[da_cheif]

VLNC still on the down trend. It needs to stay here for at least a week to have any significant.

what else would one say if he didnt buy it at a buck.....

[Mtrader]

VLNC still on the down trend. It needs to stay here for at least a week to have any significant.

what else would one say if he didnt buy it at a buck.....

Better than to buy it at 4, 3, 2, 1 and loose every turn.

[da_cheif]

only because u dont know what ur doing i suppose.........notta trader????

[Tor]

http://www.bloomberg.com/

Looming Crash Prompts Jump in Distressed Debt Hiring

By Kabir Chibber and John Glover

May 30 (Bloomberg) -- The biggest winners from the global buyout boom are hiring distressed-debt bankers in Europe at the fastest pace in five years.

Goldman Sachs Group Inc., the world's most profitable securities firm, hired Andrew Wilkinson, the lawyer who advised creditors in the bankruptcies of Eurotunnel Plc and Parmalat Finanziaria SpA, to help lead its restructuring business in London. Morgan Stanley, the third most-active merger adviser this year behind Citigroup Inc. and Goldman, added seven bankers in the past year, boosting its group to 61. Blackstone Group LP, poised to become the world's largest publicly traded buyout firm, is starting a corporate restructuring group in Europe.

``When the turn does come, it will be unlike anything we have ever seen before,'' said Iain Burnett, 43, managing director of Morgan Stanley's special situations unit in London. ``The scale of it could be considerable because of the size of some of these leveraged deals,'' said Burnett, who began his career in London a month before the October 1987 stock market crash.

Firms are paying as much as $3 million a year for bankers who advise bankrupt companies and for traders who specialize in defaulted debt, according to Heidrick & Struggles International Inc., the world's third-largest recruiting firm. That's on par with derivatives and commodities traders.

Adding Debt

Restructuring groups are growing faster in Europe than in the U.S. as companies in the U.K., France and Germany pile on record amounts of debt, according to Standard & Poor's. European companies borrowed a record $252.6 billion in loans and bonds rated below investment grade, according to data compiled by Bloomberg.

European companies acquired by buyout firms had debt equal to 6.2 times earnings before interest, tax, depreciation and amortization in the first quarter of this year, according to Fitch Ratings. That's up from 5.1 times in 2004 and 4.8 in 2003.

Heidrick & Struggles, based in Chicago, says it's placing more distressed-debt bankers in London than at any time since 2002, after Internet-related companies crashed. So far, there isn't much work to do. Near-record-low defaults have reduced Europe's market for distressed debt to 150 billion euros ($202 billion), a quarter of the size five years ago, according to data compiled by Deutsche Bank AG.

Little to Do

Only one European company -- Teksid SpA, an auto-parts maker based in Turin, Italy -- has defaulted this year, and only four companies worldwide have missed interest payments, according to Moody's Investors Service.

``Banks have to pay market rates to attract quality employees, but the problem is the employee may be sitting on his or her hands for six to 12 months,'' said Lee Thacker, capital markets partner at Heidrick & Struggles in London.

Companies are classified as distressed when they're in default or their bonds yield at least 10 percentage points more than similar-maturity government securities, according to S&P. Traders of distressed debt buy bonds and loans in a bet the securities will appreciate when the company's finances improve. If there's a bankruptcy, they may demand equity in the reorganized company in return for the debt.

European companies almost doubled borrowing this year to $225 billion of loans from the same period in 2006, Bloomberg data show. They sold an additional $27.6 billion of so-called junk bonds, a 30 percent increase from a year earlier. Such debt is rated below Baa3 by Moody's and BBB- by S&P.

Lowest Rates

The riskiest companies, those with a CCC credit rating or worse, are able to get the lowest borrowing rates ever, at 3.3 percentage points over benchmark European government debt, Merrill Lynch & Co. indexes show. The yield gap reached a high of 42.1 percentage points in the month after the terrorist attacks of September 2001.

Risk premiums on U.S. junk-rated corporate bonds yesterday fell to a record 2.42 percentage points more than Treasuries, Merrill indexes show. The spread is half the average of about 5 percentage points over the past five years.

``It's like a hangover, people will wake up and say, `what have I done?''' said Michael Weinstock, who helps manage $3 billion of distressed debt at private equity firm Quadrangle Group LLC in New York. Quadrangle this month hired a second banker to focus on European distressed debt. ``Record-high levels of financing now mean record levels of defaults in the future. There's every reason to believe we're near a market top.''

The ranks of distressed debt bankers in Europe have swelled by about 30 percent to 400 this year, according to London-based financial recruiter Kennedy Associates. Worldwide, there are about 1,500 bankers specializing in debt of troubled companies, including 800 in the U.S. and 300 in Asia, said Jason Kennedy, founder of Kennedy Associates.

European Pace

``The U.S. market is larger and more established,'' said Kennedy, who has hired distressed-debt bankers in London for clients including Goldman, Citigroup and Lehman Brothers Holdings Inc., all based in New York ``Many banks here are just starting to build up their distressed desks.''

Investing in Europe's troubled companies picked up 14 years ago when Frankfurt-based Deutsche Bank hired Martin Dent, followed a year later by Julian Nichols, who is head of distressed debt in Europe for Germany's largest bank. Deutsche Bank, which doubled its distressed-debt staff over three years to about 120 bankers worldwide, more than any other bank, is planning to increase, Nichols said.

``Distressed debt will continue to grow,'' Nichols said. ``As the value of leveraged loans in the market increases, the absolute level of defaulted debt will increase, even if the ratio remains similar to what it is currently.''

Goldman Hires

Goldman last year hired Lachlan Edwards from London-based investment bank NM Rothschild & Sons Ltd. to head its restructuring unit. In March, it brought in Wilkinson, the former managing partner at law firm Cadwalader Wickersham & Taft in New York.

Goldman co-President Gary Cohn said ``the institution that figures out first that the credit environment has changed will be best positioned,'' according to a May 17 note to clients by Jeffery Harte, a Chicago-based analyst for Sandler O'Neill & Partners.

Greenhill & Co., the investment bank established by former Morgan Stanley Group Inc. President Robert Greenhill, hired Martin Lewis, 52, in February from Miller Buckfire & Co., the firm advising bankrupt energy company Calpine Corp. of San Jose, California, and auto-parts maker Dura Automotive Systems Inc. of Rochester Hills, Michigan, on their reorganizations.

Greenhill, chairman and chief executive officer of the New York-based investment bank, said in a release at the time that the hiring was ``in preparation for when the economic cycle turns.''

Ramping Up

ABN Amro Holding NV doubled a group that deals with troubled companies to 20 in the past year, and plans to have 40 in the ``medium term,'' said Boe Pahari, global head of special situations and distressed capital in London for Amsterdam-based ABN Amro, the largest Dutch bank.

New York-based Merrill Lynch in November hired Ben Babcock from Lazard Ltd. to set up a corporate restructuring business in London. Babcock has since added one person dedicated to restructuring and can pull in people from Merrill Lynch's corporate finance business as needed, he said.

BNP Paribas SA, France's biggest bank, hired Steven Franck from New York-based Morgan Stanley this year to increase its distressed debt operation in London to four.

``People have been forecasting a meltdown in credit in the next 12 to 18 months,'' said Michael Gibbons, head of the special situations desk at Paris-based BNP Paribas. ``We tend to crash when we least expect it, rather than when we forecast it.''

Adding Staff

New York-based Blackstone in December hired Close Brothers Group Plc's Martin Gudgeon, who advised creditors of Eurotunnel and the management of Polestar Group, a Milton Keynes, England- based magazine printer that agreed to a $1.6 billion restructuring in December to avoid collapse.

Houlihan Lokey Howard & Zukin, the Los Angeles-based investment bank, employs 20 in Europe for its restructuring business, up from two when it started in 2002. The bank is looking to build a similar group in Asia, according to Joseph W. Swanson, its London-based managing director.

Zurich-based UBS AG, Europe's largest bank by assets, has been adding staff to its distressed-debt business this year, said Doug Morris, a spokesman in New York who declined to provide details.

Jeff French, a spokesman in London for Citigroup, the most active merger adviser this year, declined to comment. JPMorgan Chase & Co. spokeswoman Stefania Signorelli, Credit Suisse spokeswoman Rebecca O'Neill and Lehman Brothers spokeswoman Ruth Lavelle, all reached at their offices in London, also declined to comment.

Apollo Coup

Banks are looking for opportunities like the 2003 takeover of Zurich-based Cablecom AG by Apollo Capital Management LP, along with Goldman and Soros Private Equity Partners. They bought the distressed debt of Switzerland's largest cable TV company, swapped it for equity and in 2005 sold it to John Malone's Liberty Global Inc. for $2.2 billion.

S&P forecasts the default rate, which was 2.3 percent in April, will rise above 2.5 percent by year-end in Europe. In the U.S., the 12-month default rate is 1.4 percent.

``The risk in all of this is that the higher we fly, the further we could fall as and when the market turns,'' said Paul Watters, S&P's London-based director of debt recovery ratings. ``Many borrowers are tacitly acknowledging the growing vulnerability.''


Insider

I dont see any downturn on the horizon. Maybe next year sometime. Market could be up 20% by then.

[bullishnot]

Yup, down big, and wipe out the pig longs..

[GOOSE2]

"When the turn does come, it will be unlike anything we have ever seen before "

you got that right........SNORT

http://chart.bigchar.../...S&rand=4606

Ha.......Wally still pimping VLNC.


Don do you still have Carl calling the ES daytrades on the hotline?