Monday 21 May
Over the next several years, it is estimated that European banks need to dispose of approximately €2.5 trillion of non-core assets. The €800 billion “firewall” against sovereign debt default in Europe and long-term refinancing operations (LTRO) have eased liquidity stress among the region’s banks, but has not dealt with their solvency issues.
Like US banks, European lenders bought plenty of lower quality, higher yielding debt between 2003 and 2008 to support leveraged buy-outs, real estate deals and structured financial products. They are now under significant pressure to sell these, and other, assets as a result of upcoming Basel III regulation, the need to reduce reliance on wholesale funding and requirements from the EU and local governments. For the first time, Europe is experiencing a distressed debt cycle of vast proportions.
This presents a compelling opportunity for investors. However some widely believed myths are preventing private capital from investing in European corporate distressed debt.
Banks are unwilling to sell assets at distressed prices due to weak balance sheets
The truth is that a number of European banks are selling distressed assets, but this is not necessarily visible because divestitures are generally less public for a number of reasons. The roundtable will discuss the reality behind this myth, what skills and experience are required to access these sales processes and the size of the actionable distressed debt opportunity.
European insolvency laws make it next to impossible to achieve debt-for-equity swaps
European insolvency laws are varied and complex. Knowledgeable investors carefully select the jurisdictions they work in and know what can and cannot be achieved. The roundtable will compare and contrast legislation in different countries to highlight the most attractive areas and how laws in more difficult countries are evolving.
Unions, laws and culture prevent effective operational restructurings of European companies
Restructurings in Europe are fundamentally different than in the US. European labour laws, unions and culture are important and powerful considerations. We will discuss how it is possible to work constructively with local officials and unions to develop realistic plans which can ensure a company’s long-term viability and maximize employees’ welfare over time while agreeing to appropriate short-term sacrifices.