Registration and breakfast
Chair’s welcome and presentation
Morning keynote
Hear a marquis speaker from the restructuring market address the key issues they see in the year ahead for North American corporates, distressed and restructuring investors.
Opening panel: Current state of the US restructuring market
The 2023 North American outlook began with negative sentiment and low expectations for the domestic economy with a predicted recession, high inflation and the highest interest rates in 15 years. 2022 was not a standout year for restructurings, but a flurry of activity in the last month of the year saw bankruptcy filings increase in December. According to data from Debtwire’s Restructuring Database restructuring activity has continued into 2023 with a 36% uptick in bankruptcies in the first half of 2023 with 143 cases filed compared to 105 filed during the same period in 2022. Panellists will discuss the key issues affecting North American restructuring including:
- How are sponsor-backed companies facing challenging economic headwinds and how are sponsors defending investments to avoid a Chapter 11 filing?
- What will the longer-term impacts of high inflation be for leveraged borrowers? What is the current state of global tax planning and how can tax be a material contributor within restructurings both in and outside of court?
- Debt exchanges, distressed debt buybacks, asset dropdown transactions with unrestricted subsidiaries, non-pro rata capital raises, equity cures and negotiated covenants – how are creditors reacting to these manoeuvrers to avoid bankruptcies?
- Where do panellists see future restructuring activity? Will SPACs generate more bankruptcies in 2024?
Coffee break
Panel: The evolving landscape of lender-on-lender tension
This time last year in Miami, previous panellists predicted that creditor-on-creditor tensions would continue as investors seek to find advantageous positions in loan restructurings. Hallmark cases including Serta, Boardriders and TriMark are seen as potential for borrowers, operating with a simple majority, to create super senior debt capacity and then “roll-up” or exchange their existing debt into new facilities. Other popular models include so called “dropdown deals” along the lines of Revlon and J Crew’s strategy of moving assets into unrestricted subsidiaries. Most recently, the “double dip” transaction has become a more popular approach. How will the landscape lender-on-lender tension continue to evolve in 2024? Panellists will discuss:
- How are bankruptcy judges’ ‘open market purchase’ or non-pro-rata debt exchange rulings impacting creditors and investors?
- What will the impact of the Serta bankruptcy ruling be on the excluded minority lenders? How will this impact the precedent of this type of cases going forward?
- How are ‘double-dip’ transactions such as Sabre and At Home Group being structured and how will this trend evolve and impact future cases?
- Which innovations have emerged to address the ability of borrowers to engage in uptiering?
Case study: Onstage interview
Panel: The evolution of private credit in a restructuring context
Alternative asset managers such as Ares, Blackstone, Apollo, Brookfield, KKR and Carlyle have roughly doubled commitments to private credit since the end of 2019. This has fuelled the growth in the private credit market to be comparable with syndicated loans and high-yield markets in the US. Unlike the syndicated loan market, private credit has seen comparatively stable valuations during economically challenging times, but despite this, credit conditions are expected to worsen. Direct lenders typically have closer relationships with borrowers and have shown a willingness to get involved with sponsors and troubled borrowers during tough times to negotiate debt workouts which has minimised traditional defaults. However, public and private credit borrowers are both subject to today’s market challenges and factors that have steadied borrowers are starting to erode. This panel will discuss:
- How are tighter margins and thinner leverage affecting private lenders today?
- How high is the average asset-quality risk for private creditors and is this sustainable?
- Are private credit funds keeping afloat ‘zombie companies’ longer than is necessary to avoid bankruptcy? What will the long-term impacts be of this on the restructuring market?
Lunch
Panel: The current state of Latin American restructuring
Rising interest rates, political risk, currency exposure and a significant amount of debt scheduled to mature over 2024 and 2025 in Latin America could create opportunities for distressed investors. However, many of the distressed situations and opportunities depend on government and regulatory issues faced by debtors. Panellists will discuss:
- How are central banks’ interest hikes across Latin America impacting lenders and borrowers trying to refinance?
- How is the Brazilian governments’ new fiscal policy affecting distressed and restructuring investors?
- Which sectors and companies in Latin America should opportunistic investors look towards? How are the following sectors performing: the nonbanking financial sector, airlines and power generation?
Panel: Likely-to-distress in commercial real estate
US banks highlighted concerns about commercial real estate and specifically offices earlier in the year as an area of growing concern. This is as property values are falling and there more defaults on loans amid rising interest rates and economic challenges. Many borrowers have been forced to refinance or restructure to avoid a default. Commercial office space in key states such as California saw an average office vacancy rate of 21.6% in the first quarter of 2023. Panellists will discuss:
- What strategies are borrowers taking to refinance and restructure loans to avoid bankruptcy? How are investors reacting to these tactics?
- What are the opportunities for distressed investors? How many more distressed situations will reach bankruptcy?
- What opportunities are there for vacant offices such as empty property mitigation services?
Coffee break
Panel: ESG as a catalyst for oil and gas restructurings
Alpine Energy Summit Partners filed for Chapter 11 in July 2023 to sell its assets amid an “increasingly difficult” environment to obtain new financing to support operations. The company has been unable to bring in new credit creating a liquidity crunch which has left the company unable to pay its invoices. CEO, Craig Perry, cited the steep drop in natural gas prices, unplanned outages and more socially conscious lenders as the factors leading to bankruptcy. Will this case be the first in a line of bankruptcies as economic headwinds and strict ESG criteria as well as an expected deceleration in market growth in the sector continue to challenge energy companies? Panellists will discuss:
- What are the challenges in securing new financing for oil and gas companies? Are these conditions unique to the sector or is this a cross-sector trend?
- What is the outlook for oil and gas prices? How will this impact borrowers and lenders?
- Which strategies can oil and gas companies use to future proof their operations to attract new lenders?
Panel: Sector focus – healthcare and hospitals
According to Debtwire's Restructuring Database, healthcare bankruptcy filings are considerably higher this year, reaching 30 filings in the first 6 months of 2023 compared to 46 in the full year 2022. A report by Gibbins Advisors cites the tailwinds affecting the sector as high interest rates (which are impacting borrowing cash flow and refinancing ability), labour and supply cost pressures, margin squeezes, the shift from inpatient to outpatient care in community settings post COVID-19 and the unwinding of Medicaid Continuous Enrolment. Experts expect 2023 and beyond to see a record number of healthcare bankruptcies. Panellists will discuss:
- Why are so many healthcare Chapter 11 cases in “free fall”?
- Which regulatory and legislative updates will impact restructurings in the healthcare market?
- How are related service providers being affected by the increase in bankruptcies in the sector, such as patient management systems?
Conference close and networking drinks
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