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Liquidity floods European distressed assets
31 January 2014
Funds ready to bet billions, says Debtwire
Liquid primary markets will enable companies to refinance and
private equity groups to extract more dividends and hit the
acquisition trail again, according to Debtwire’s
10th European Distressed Debt Outlook 2014.
"The threat of an imminent eurozone break-up that filled the
headlines in 2011/2012 seems to have abated, at least for now,"
said James Roome, co-leader of Bingham’s global
financial restructuring group. "Trust and confidence in the
markets seems to be rallying after a relatively stable 2013,
although there are wide disparities in growth trajectories
amongst European economies."
In 2013, US and European economies have been boosted by central
banks’ commitment to ultra-low interest rates. The
combination of return-hungry investors keen to put their money
to work and surging inflows into high-yield funds have sent
secondary prices rocketing and helped businesses to escape
"The steady flow of distressed situations, however, will not
stop. Ultimately not all issuers can afford to refinance and
the swelling number of high yield issuers directly translates
into an increased probability of future distressed
opportunities," said Mario Oliviero, deputy editor at Debtwire
Last year many European banks took advantage of high secondary
prices to dispose of junk assets. The surface has only been
scratched here, and more needs to come out to clean up balance
sheets, particularly in Southern Europe.
"Supply will meet the demand of US hedge funds ready to buy
everything that trades and bet billions of dollars on
Europe’s macro economic recovery. The show will go
on," added Oliviero.
In partnership with Rothschild and Bingham McCutchen, the study
surveyed 100 European hedge fund managers, distressed debt
investors and private equity professionals and provides insight
into their expectations for the European distressed debt market
in 2014 and beyond.