Registration and coffee
Chair’s opening remarks
Keynote: The US distressed debt investment outlook
Hear a marquis distressed fund manager assess the outlook for US distressed debt and share their perspective on the impending wave of distressed and restructuring assets. According to experts, distressed debt investors are currently fundraising to boost firepower to deploy during the expected economic downturn to snap up troubled companies. Last year, distressed debt funds made higher returns than the equity markets at over 15%. The keynote speaker will review the opportunities to deploy capital to buy up distressed assets in the US:
- Will the US face a recession by the end of 2022?
- What is the state of the US fundraising market for distressed asset managers?
- How would a recession affect junk bond default rates?
- Are there enough suitable targets in the market?
Opening panel: Current state of the US distressed and restructuring market
Debt investors and economists have differing views on whether a recession will hit the US this year or early next. Distressed asset managers who anticipate a downturn are planning opportunistic activity, whereas others doubt that a recession will boost the record-low corporate default rates that followed the COVID-19 pandemic. This panel will review the macroeconomic climate in the US and its impact on the US distressed and restructuring market. What are the opportunities and challenges? Panelists will debate:
- Will a global economic downturn lead to higher rates of corporate default?
- What are the opportunities for debt funds to deploy dry powder? What is the deal pipeline?
- How have “capital call” structures increased in popularity? What are the implications of ‘de-SPACs’?
- What are the long-term implications of the government stimulus that flooded the market during COVID-19?
Panel: Creditor-on-creditor violence
In recent years, the rise and fall of Wirecard prompted wider discussions about the role of government bailouts as well as short sell alerts from activist investors. Typically, and more commonly found in syndicated markets, larger deals have led to misaligned goals between investors. This panel will review the current themes in lender-on-lender violence reviewing recent cases including Revlon and TPC Group’s summary judgement.
- Will a downturn and higher numbers of default cases lead to a reduction in creditor-on-creditor violence?
- What are the most common maneuverers engaged by creditors to materially disadvantage other lenders? Up-tier exchanges or covenant-stripping?
- How can lenders add provisions to proactively protect against up-tiering?
- How do lender-on-lender violence strategies impact valuations, particularly in litigated cases?
Case study: The landscape of cryptocurrency during the ‘cryptopocalypse’
Victim of the US digital asset slump, Voyager, filed for bankruptcy protection under Chapter 11. Three Arrows Capital, a crypto-focused investment firm, also filed its Chapter 15 and corresponding restructuring. Other notable cases include Celsius and 3AC. Investors are referring to the impact of the financial crisis on the crypto space as ‘crypto winter’ and experts predict that this could be the beginning of a series of bankruptcies of major cryptocurrency companies. This session will review:
- How will the law need to adapt to bankruptcy proceedings involving cryptocurrency companies?
- Should customers’ digital assets be considered property of the bankruptcy estate in crypto cases?
- Who are the buyside candidates in the sale of Voyager?
- Which other firms could fall victim to the digital asset downturn?
Panel: Are ESG considerations still a priority in the face of a global economic downturn?
In a recent study by RBC, almost 50% of US investors said that financial performance and returns were more important than ESG impact. US-based ESG funds have returned 10.2% on average per year, compared to 12.6% for broader funds. A new report released by Bernstein advised that if the US heads into a recession, inflation is expected to remain high, but diversity, inclusion and the circular economy themes are well-positioned in times of slowing growth and recession with relatively low volatility, high free cash flow yield, and offer higher quality at a reasonable price. This panel will discuss:
- Will ESG considerations become less important in the face of an economic downturn?
- How might LPs reassess ESG priorities in the face of an economic downturn when allocating funds?
- How can investors use restructuring opportunities to promote diversity, inclusivity, and circular economy?
- How are green bonds performing and what is the future of ‘green’ or climate related issuance?
Panel: Consumer sentiment – a future distressed sector?
Commercial and consumer bankruptcy cases have been creeping up in 2022, but largely remain at a low rate. Chapter 11 cases have been amassing at a steady pace, however 2022 also saw a spike in small business bankruptcies. These figures could rise further if congress passes legislation to increase the debt limit under Chapter 13. Meanwhile, US consumers are starting to feel the pressure of inflation as they struggle to cope with higher prices for necessities. Banks are preparing for turbulence by increasing their loan loss reserves whilst they experience signs of distress as Americans save less of their earnings. This panel will discuss:
- As low-income consumers are most impacted by inflation, which types of companies do you expect to experience stress first?
- What can the Fed do to raise economic growth and dampen inflation?
- 90-year-old cosmetics giant, Revlon, was the first consumer company to file for Chapter 11 bankruptcy protection in months, which retail company will be next?
- Will higher-incoming consumers keep splurging on luxury items?
(Stream A - Market Dislocations) Chair's welcome remarks
(Stream B - Focus on Latin America) Chair's welcome remarks
(Stream A - Market Dislocations) Panel: The rise of short activism
Public activism levels dipped during 2020, but with the rise of depressed company prices, activists have been engaging with boards urging them to be more aggressive in restructuring. However, there could be too much money chasing too few deals in the US.
(Stream B - Focus on Latin America) Panel: Focus on LatAm Chapter 11 bankruptcies
This session will review recent Chapter 11 and Chapter 15 restructuring cases in Latin America including new situations in Chile, Colombia, Mexico and Argentina. Latam Airlines Group SA has recently been approved a Chapter 11 exit plan that puts $5.44bn of fresh capital into the business just two years after its pandemic-driven restructuring.
(Stream A - Market Dislocations) Panel: Risk management tools for distressed investors
Crisis-fighting policies such as low-interest rates and state-backed financing are propping up troubled companies, but with dry powder and few battered securities to scour for nuggets of value, investors are being forced to get crafty and opportunistic. How can distressed investors manage risk as opportunities become opaquer?
(Stream B - Focus on Latin America) Panel: Distressed country focus - Mexico
Mexico has been a fertile hunting ground for distressed investors with an eye for a bargain and an appetite for risk. The country saw increased FDI following the pandemic with US equity funds and institutional investors, such as Canadian pension plans, looking favourably on opportunities in the country. However, Mexico’s lacklustre economic performance has widely been put down to its president who has offered little financial support to big businesses.
(Stream A - Market Dislocations) Panel: Are family offices the new debt investors?
Appetite for private debt among family offices is increasing despite market turbulence and a challenging economic outlook. In a recent survey, two-thirds of family offices indicated to BlackRock that they intend to increase exposure in the future and have been attracted by the potential returns from dislocated markets.
(Stream B - Focus on Latin America) Panel: Distressed country focus - Brazil
In 2021, Brazil’s largest distressed asset manager put together plans to raise $1.3bn to buy Brazilian assets. Root Capital, Brazilian distressed-credit investing specialist, also expect interest rates and a weak national economy to multiply opportunities. This panel will debate the opportunity and risk/rewards profile of distressed investing in Brazil.
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