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Hedgeweek article: “SVP symposium sees wealth of distressed opportunities”

Hedgeweek article: “SVP symposium sees wealth of distressed opportunities”

Victor Khosla, founder of Strategic Value Partners, opened the discussions confirming that we are ‘currently in an economic slowdown, and are potentially heading for a double-dip recession’. He said ‘the climate of widespread fear offers plenty of opportunities for distressed investors’.

The keynote speech was given by Dr Andreas Dombret, Member of the Executive Board of Deutsche Bundesbank. He spoke about financial system regulation and the developing rules and tools for capturing systemic risk, stating that a capital surcharge would be required for systemically important financial institutions. The cost involved would not be unduly burdensome and he called for even greater transparency across the financial services sector, especially among systemically important financial institutions.

Presentations given throughout the morning all reinforced the overarching requirement for more capital to be injected into the banking system, and for assets to continue to be sold to reduce the banks’ bloated balance sheets, in order to solve the current crisis in the eurozone. In his speech on the European Economic Outlook, Gilles Moec, Co-Head of European Economics Research at Deutsche Bank, stressed the need for increased support for the peripheral European countries over a longer period of time.

Meanwhile, Stephen Dulake, Head of European Credit Research and Strategy at JPMorgan, who gave a presentation on credit availability and the stability of the banking sectors in Europe, said that: ‘Capital needs to be forced into the banks. Pressures on bank balance sheets have increased and as part of the deleveraging process, they will continue to sell off non-core assets’.

The potential for distressed investors to capitalise on banks’ needs to dispose of non-core assets was a key theme throught the day and the focus of the panel on Distressed Trading. The discussions amongst the panelists, which included Leander Christofides (Head of European Loan Trading, JPMorgan), Michael Guy (Head of EMEA Special Situations, BofA Merrill Lynch), and Michael Nitka (Head of Loan Products, Cantor Fitzgerald), and which was moderated by Kevin Lydon (Head of Trading/Origination, SVP Global), concluded that the banks which are receiving additional capital can now afford to sell off multiple assets at distressed prices. Furthermore, companies which are no longer eligible for lending and have no access to capital, are also providing good opportunities for investors.

Peter Marshall, Co-Head of European Restructuring at Houlihan Lokey and James Roome, Managing Partner at Bingham McCutchen together gave a review of European Restructuring practices and developments, emphasising the need for a range of specialist skill-sets, including operational turnaround capabilities, in order to effect successful restructurings.