Distressed Debt


Highlights of our extensive coverage and analysis of the largest stressed and distressed debt, loans, funds, companies and the distressed debt market across the Americas, EMEA and Asia. Our intelligence, reporting and analysis also includes information on distressed trading and investing written specifically for investment managers, investment bankers, legal professionals and corporate professionals.

EMEA Distressed Debt Wrap 2023

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Drying Liquidity, Looming Maturities in Tense Geopolitical Environment to Drive Restructuring Uptick in 2024 After Slow Burning 2023; More ‘Holistic’ Workouts Expected

After years of “waiting for the wave,” 2024 might be the time when activity in the restructuring market may finally pick up. Wars in Ukraine and the Middle East, U.S. elections and weakening Chinese growth paint a testing picture for the world economy. Well-known challenges such as higher-for-longer interest rates, near-zero economic growth in Europe and a cost-of-living squeeze entering its third calendar year all add to the possibility of an animated year on the distressed debt front, despite the current strength of the high-yield bond market.

Last year, restructuring negotiations often revolved around the size of the new money check sponsors had to write for lenders to agree to amend-and-extend deals. Shareholders no longer able to reinvest were forced to hand over the keys to creditors, resulting in a rise in debt-for-equity swaps.

The companies that avoided operational issues still had access to debt capital markets, but with key interest rates staying elevated, the price often doubled compared with cheap pre-pandemic debt.

“Looking ahead, the number of structures facing debt maturities in the next couple of years is significantly higher than last year. Many cap stacks, which would previously have achieved a refinancing or pretty easy amend and extend, will find such pure balance sheet solutions harder to come by. More holistic restructurings, including operational restructurings, will be required to bring interest costs and leverage levels to a sustainable quantum,” Helena Potts, financial restructuring partner at Paul Hastings told Reorg.

According to various data providers, including Reorg’s own data, there are approximately €76.5 billion of high-yield bonds maturing in 2024 and 2025. Although the maturity wall is weighted toward 2025, there is still significant work to be done on the €24.5 billion of notes due in 2024.

Potts added that in 2023 companies faced a series of interest rate hikes, and as yet, those with significant reserves have not felt too challenged by the impact on their cash balances. But cash reserves are becoming more constrained, particularly in the mid-market sector. “Across all capital structures there is an absence of early warning signals for lenders and this can lead to situations becoming sub-optimal for all stakeholders, as there is not sufficient time to find rescue packages where the liquidity road just runs out,” she said.

Unlock comprehensive insights by downloading the 2023 Restructuring wrap now and delve into the complete report.

For more reports and guides by Reorg, please click here.

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Ukraine Webinar: What’s Next for Kyiv’s Creditors?
Thu Feb 8, 2024 12:49 pm Distressed Debt  Financial Restructuring

Register now!

Join Reorg on Wednesday, Feb. 21, as we discuss:

  • Ukraine’s upcoming sovereign debt restructuring;
  • Resilience in Ukraine’s economy; and
  • The international work to seize Russian state assets.

Panelists:

You can find recent coverage on Ukraine credits here.

Attendees can submit questions during the webinar or email them in advance here.

Webinar details:

  • When: Wednesday, Feb. 21, at 2 p.m. GMT/3 p.m. CET.
  • Registration: To register for the webinar, click here. Please register using your business email address.

If you would like to be panelist on any upcoming webinars, please contact marketing@reorg.com, and if you would like to be notified for the upcoming webinars, sign up for Reorg on the Record.

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CEEMEA Credit Wrap 2023
Wed Jan 24, 2024 11:06 am Distressed Debt  Financial Restructuring

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Patience Pays Out in Corporate Distress but Sovereign Restructurings Prove Hard to Unlock

After a bruising 2022 dominated by Russia’s full-scale invasion of Ukraine, 2023 has been a lucrative year for the brave investors who ventured into distressed Ukrainian credits and certain special situations. A number of the high-profile issuers adopted a creditor-friendly approach allowing for several 40 to 45 point recoveries during the year.

The 2023 macroeconomic backdrop for high-yield borrowers in CEEMEA has been challenging to say the least – particularly on interest expenses. The U.S. base rate on which CEEMEA companies typically pay a 5% to 10% premium had soared from a comfortable 25 bps before Moscow’s invasion in 2022, to 450 bps by the start of 2023. The new interest cost reality meant many CEEMEA issuers stepped away from the wider capital markets, seeking tailored funding solutions at survivable rates instead.

Ukrainian grain and poultry producer MHP raised $400 million in fresh development finance in September to buy back its $500 million 7.75% 2024 bonds, which are currently trading in the mid-90s, 45 points higher than in January. In its second buyback attempt launched this week, MHP is offering investors 95 cents on the dollar, up from 85 cents in the first tender.

Meanwhile in Russia, eurobond issuers have endured their first full year locked out of Western capital markets following the unprecedented 2022 sanctions. Routine dollar refinancings for strong commodity exporters are now off the table and even Russian cash redemptions struggle to make it through the blocked payment systems. Several companies with multi-billion dollar capital structures have ceased reporting altogether. In June, Reorg hosted a webinar on the impact of sanctions in distressed situations and debt restructuring.

Unlock comprehensive insights by downloading the CEEMEA Credit Wrap 2023 now and delve into the complete report.

For more reports and guides by Reorg, please click here.

If you would like to be panelist on any upcoming webinars, please contact marketing@reorg.com, and if you would like to be notified for the upcoming webinars, sign up for Reorg on the Record.

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EMEA Restructuring Wrap 2023
Wed Jan 10, 2024 12:27 pm Distressed Debt  Financial Restructuring

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Reorg Data Shows 2023 Featured a Marked Change in Restructuring Trends Since 2022

Introduction

There has been a measurable uptick in restructuring activity in Western Europe over the last 11 months of 2023 compared with 2022, according to data collected by Reorg in the EMEA Restructuring Database (RXD), available on Credit Cloud.

Key Takeaways

  • More Restructuring Deals in 2023 – During 2022, 29 debtors completed financial restructurings, compared with 47 that have completed so far in 2023 marking a large increase – there are currently still 34 ongoing restructurings in Western Europe as of Dec. 4, 2023.
  • Half of Deals Conclude Consensually – 47% of “in restructuring” debtors in 2023 are pursuing out of court, consensual type restructurings, a figure which is similar to, the 53% implemented consensually during 2022; and the 52% implemented and closed consensually during 2023 so far.
  • English Restructuring Tech Most Popular – During 2022 and 2023, just over half of deals in Western Europe the last 23 months used either a Scheme of Arrangement, Part 26A Restructuring Plan or a Company Voluntary Arrangement.
  • More Debt for Equity Type Deals by Number in 2023: In 2022, just 27% of deals included a debt for equity exchange, compared with 34% of deals closed so far 2023.
  • More New Money Deals Feature in Equitization in 2023: In 2023, where a debt-for-equity swap was implemented, 69% of deals also featured new money, whereas in 2022 only 14% of deals which included a debt for equity swap also featured new money.
  • 2023 Sees Less in Court Equitisations: In 2023, 45% of debt for equity deals were concluded in court, compared with 62.5% of the same type of deal in 2022 which required court involvement.
  • Amend & Extend Financial Restructuring Deals on the Increase: Just 17% of deals in 2022 featured an amend-and-extend transaction, compared with 40% in 2023.

Download the EMEA Restructuring Wrap 2023 now to stay informed and gain strategic insights into the evolving restructuring landscape.

For more reports and guides by Reorg, please click here.

If you would like to be panelist on any upcoming webinars, please contact marketing@reorg.com, and if you would like to be notified for the upcoming webinars, sign up for Reorg on the Record.

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Reorg London Credit Seminar

Exploring current themes and what lies ahead for the primary and distressed markets.
In-person only event at the Biltmore, Mayfair.

November 2, 2023
3:30 PM-8:00 PM

You’re Invited! If you haven’t registered yet, we cordially invite you to join us.

Agenda at a Glance

  • Registration: 3:30 – 4:00 p.m.
  • Welcome by Global Head of Editorial, Mario Oliviero: 4:00 – 4:05 p.m.
  • Performing Credit Panel: Debut Issuers Return as Sponsors and Investors Embrace New Normal, moderated by Bart Capeci, including audience Q&A: 4:05 – 4:55 p.m.
  • Spotlight on ESG by Luke Wood: 4:55 – 5:05 p.m.
  • Distressed Panel: Lenders Take Charge as Sponsors Run Out of Options in High Interest Rate Market, moderated by Magnus Scherman, including audience Q&A: 5:05 – 5:55 p.m.
  • Cocktails, Canapes and Networking: 5:55 – 7:45 p.m.

Bart Capeci will moderate the performing panel ‘Debut Issuers Return as Sponsors and Investors Embrace New Normal’ featuring guests Camille Mcleod-Salmon from Fidelity International, Jamie Cane, CFA from Muzinich & Co, Natalie Day Netter from J.P. Morgan and Pieter Staelens from CVC Capital Partners.

London credit seminar Reorg November 2 
https://ow.ly/vsNK50PYufP

Magnus Scherman will moderate the second panel ‘Lenders Take Charge as Sponsors Run Out of Options in High Interest Rate Market’ which will be moderated by Magnus Scherman. This panel includes experts Christian Herrmann from Polus Capital Management, Gani Diwan from Triton Partners, Sam Whittaker from Lazard and Toby Smyth from Simpson Thacher & Bartlett LLP.

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In-person only attendance for credit professionals in London.
Register today for great content and networking over cocktails and canapes.

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30+ Debtors File in US, China Real Estate Contagion Spreads…
Fri Sep 1, 2023 3:46 pm Distressed Debt

Interest rates remain a critical point of concern for global investors as distressed activity accelerates across North America, Europe and Asia.

In North America, 32 debtors have filed for chapter 11 thus far in August, heavily represented by real estate names as commercial property owners wrestle with increased interest costs for floating-rate debt. While market participants are encouraged by benign consumer and producer price data, stronger-than-expected retail sales last week and Federal Reserve minutes on Wednesday highlighting “upside risks to inflation,” many now expect that a fed funds rate of over 5% will likely endure. 

In the wake of the tragic Maui wildfires, restructuring advisors have been circling Hawaiian Electric Industries, triggering questions and concerns regarding potential liabilities by market participants in both the municipals and corporate markets. 

Meanwhile, the European Central Bank, after boosting its key interest rate to a 22-year high in June, is confronting inflation that is much stronger than the United States, even as economic growth is weaker. 

In Asia, The Peoples Bank of China held its prime loan rate at 4.2% yesterday and lowered its one-year LPR to 3.45% from 3.55%, a smaller move than was expected by many economists. China is facing increased stress in its property sector, with bellwether developer Country Garden and shadow banking giant Zhongzhi Enterprise Group each lurching toward restructurings. 

Reorg’s editorial team is delivering the most in-depth data, analysis and reporting on thousands of credits across the full credit lifecycle. A glimpse into our offering is below:

Country Garden
Country Garden Holdings Co. Ltd.’s onshore corporate bonds have all been suspended. The suspension announcements cited Country Garden’s Aug. 10 profit warning announcement to the Hong Kong exchange, in which the company stated the difficult situation facing the real estate industry.
» Continue Reading

Ukraine
The country’s sovereign eurobonds have stabilized in price following a 10-point climb in the past month, marking the highest price for Ukraine’s $19.7 billion of hard currency notes since June 2022. Ukraine’s $912 million 7.75% 2024 bonds have risen to 34/35, nearly doubling in price since mid-May when they were at 18 cents. 
» Continue Reading

Hawaiian Electric Co.
The utility provider, a subsidiary of Hawaiian Electric Industries Inc., is potentially liable for the damage associated with the Lahaina/Maui fire if the lawsuits brought against it should prove successful, according to market sources. Hawaiien Electric Co. is the parent company of Maui Electric Co., the operating company that allegedly started and perhaps exacerbated the speed and intensity of the Aug. 8 wildfire. 
» Continue Reading

GoTo Group
The group’s sponsors snapped up $160 million of the company’s outstanding debt during the second quarter of 2023, according to sources. It was not immediately known whether the amount was bought back by one, or both, of the company’s sponsors.
» Continue Reading

Reorg’s Americas Advisor League Tables are now available for download! Covering the first half of 2023, these analyses examine restructuring advisor activity to help you stay up to date and scope opportunities to come. 
» Download now
ERX
Using exclusive Credit Cloud data, Reorg’s 2023 EMEA Midyear Restructuring Wrap includes the inaugural European restructuring advisor league tables that summarize advisor retentions to provide you with fresh perspectives on market trends and leaders.
 » Download now

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Asia Credit Daily

Chinese regulators take further steps to cut down payments for home buyers and encourage banks to lower interest rates on existing mortgages, according to joint statements issued by the People’s Bank of China and National Administration of Financial Regulation on Thursday, Aug. 31. The minimum down payment will be uniformly reduced to no less than 20% for first home purchases and no less than 30% for second home purchases. The lower limit of mortgage interest rate for second home purchase had been adjusted to the level of related LPR+20 bps while the lower limit of mortgage interest rate for first home purchases remained at the level of related LPR-20 bps.

India’s GDP surged by 7.8% in April-June, surpassing predictions of 7.7% and up from 6.1% in the previous quarter and marked the highest in four quarters, driven by strong services sector and government capital spending. However experts suggest faster expansion in the first half of the financial year might give way to slower growth in the latter half, Nikkei Asia reported.

Shanghai Composite Index went up 0.34% to 3,130 as of 2:04 p.m. Beijing Time. Japan’s Nikkei 225 Index went up 0.28% to close at 32,711, while Australia’s S&P/ASX200 went down 0.36% to close at 7,279. Hong Kong market is closed today due to No. 9 Typhoon.

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Global Credit Highlights: August 2023
Fri Aug 4, 2023 2:53 pm Bankruptcy Filings  Distressed Debt

Reorg’s editorial leadership has selected the following list of the most compelling and topical situations across our global coverage universe.

As part of Reorg’s global data and analytics product expansion, Fundamentals by Reorg now offers earnings transcripts of both public and private debt issuers. For further inquiries, please email questions@reorg.com.

Twenty-four debtors filed for chapter 11 over the past two weeks, a list dominated by real estate names with liabilities of less than $10 million. The sector has been hard hit by rising interest rates and a sluggish recovery in occupancy as the pandemic’s “work from home” model becomes a permanent feature of the American landscape. Those hoping for relief in the form of interest rate cuts by the Federal Reserve have been heartened by economic data showing that pricing pressures are abating, but the ongoing strength in the labor markets supports the theory that the Fed will hold rates at their current level, the highest since 2001, for an extended period. A Labor Department report on Friday, Aug. 4, showed that the U.S. added 187,000 jobs in July, slightly less than consensus expectations, while the employment rate fell to 3.5%. The Fed meets again in September, with most expecting policymakers to stand pat.

Fitch Ratings downgraded the U.S. to AA+ from AAA on Tuesday, Aug. 1, citing “fiscal deterioration over the next three years, a high and growing general debt burden and the erosion of governance relative to AA and AAA rated peers.” Fitch is the second ratings agency to downgrade the U.S. In 2011, S&P Global Ratings downgraded the U.S. to AA+ from AAA. Moody’s and DBRS have maintained their AAA ratings on U.S. Treasury bills, or T-bills. The yield on the 10-year Treasury note rose to 4.18% on Thursday, Aug. 3, from 3.95% on Aug. 1.

In Europe, the second-quarter earnings season is revealing continued pressure on EBITDA margins across nations and industries. This was nowhere more evident than at French supermarket chain Casino, whose management revised its 2023 EBITDA guidance down by 51% from a forecast given just a month earlier. The heavily slimmed-down EBITDA budget was included in a July 27 presentation detailing Casino’s in-principle new-money and restructuring agreement with a consortium of investors led by EP Global Commerce and creditors holding more than two-thirds of its term loan B debt. Casino is now drafting lockup agreements and aims to implement the €8 billion debt restructuring under an accelerated safeguard proceeding by October 2023.

In Asia, while closely watched Dalian Wanda managed to transfer funds at the eleventh hour to redeem its $400 million offshore notes due July 23, the repayment failed to allay concerns around China’s real estate market. Turmoil has more recently spread to state-backed names such as Greenland Holdings and Sino-Ocean Group, and despite declarations of policy easing, the position of key developers remains precarious. Country Garden, or CoGard, recently announced an expected net loss for the first six months of 2023, compared with a net profit of 1.91 billion Chinese yuan ($268.5 million) for the year-earlier period. In the same announcement, CoGard declared it would actively seek guidance and support from the government and regulatory authorities.

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H1 2023 Restructuring Wrap

During the first half of 2023, Reorg saw 23 debtors close restructurings, considerably more than the 14 that closed deals in H2’22 and 15 in H1’22.

Restructuring activity has increased in 2023, but still falls short of 2020 levels, which saw 61 restructurings close across the year.

Only 35% of restructurings closed consensually, out of court, in H1’23. This compares with 43% and 60% in H1’22 and H2’22 respectively. There appears to be a trend of debtors being more likely to pursue in-court restructurings, with a correlating increase in challenge – 22% of deals attracted a challenge in H1’23, compared to 17% during the whole of 2022.

There are 39 restructurings currently live, 14 of which are in a court process, notably seven are in U.K. court processes (CVAs, Scheme or Part 26A Plans). As of January, this number was 45, suggesting that deals are closing.

Included in the definition of restructuring are both consensual and non-consensual transactions, which featured at least one of the following: (i) an exchange of existing debt for new debt with different terms; (ii) the provision of new money through a new instrument; (iii) the equitization of existing debt instruments; and (iv) the amendment and extension of the maturity date of existing debt instruments.

Read the full article here.

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Azure Power must walk the talk on audit completion…
Tue Aug 1, 2023 2:57 pm Distressed Debt
Azure Power Global Ltd. on July 26 filed an appeal with the New York Stock Exchange against the NYSE staff’s decision to delist its shares over an inordinate delay in filing of audited financial reports for fiscal year ended March 31, 2022, and thereafter with the U.S. Securities and Exchange Commission. The appeal may buy the company some time to prevent a potential event of default, or EoD, which can be triggered only post delisting, on its two public U.S. dollar bonds due to breach of information covenants.  

The company has told bondholders that because of the appeal, EoD may not be triggered for two to three months. It has also commissioned a legal opinion that because its reporting obligations under the U.S. Securities Exchange Act of 1934 would continue even after delisting and its shares are expected to be available to trade on the over-the-counter expert market, triggering an EoD may not be possible by the bondholders. 

The Indian renewable company on July 13 announced a change of its auditor amid a delay in audit completion and pending investigation into allegations made in whistleblower complaints, stating that management’s immediate focus is on completion of financial audit within 14 weeks.

Even as the onshore lenders have refrained from accelerating the loans due to a delay in filing of audited financials, the acceleration risk remains because of a decline in domestic credit ratings. Azure must walk the talk on releasing audited financials this time, or else it risks losing its credibility to raise the money necessary for refinancing its roughly $700 million in bonds and finding itself embroiled in a potential legal battle with the bondholders.
 
Regards, 
Malvika Joshi

Reorg’s Asia team is delivering the most in-depth data, analysis and reporting on thousands of credits across the full credit lifecycle. A glimpse into our editorial offering is below:

Genesis Global/FTXCounsel for the Genesis Global debtors and FTX debtors jointly announced via a letter to the United States Bankruptcy Court for the Southern District of New York that the parties have reached an “agreement in principle” regarding a settlement of the claims asserted by the FTX debtors against the Genesis Global debtors in Genesis Global’s chapter 11 cases and the claims asserted by the Genesis Global debtors against the FTX debtors in the FTX debtors’ chapter 11 cases. » Continue Reading

Azure PowerThe USD notes of Indian renewable energy company Azure Power Global Ltd. were down around four points after Reorg reported that the New York Stock Exchange-listed solar power producer is likely to solicit consent from its USD bondholders to amend some of its bond covenants pertaining to disclosure obligations to avert a potential event of default on the bonds. » Continue Reading

Hopson Development HoldingsHopson’s $238M Notes Due’23 and $300M Notes Due’24 dropped around 15 points in early May 2023 but have since largely recovered, according to Refinitiv. The drop in price coincided with market rumors widely reported by local media surrounding a one-year extension of an undisclosed $100 million set of private notes maturing in the same month, raising market concerns regarding its off-balance sheet liabilities and liquidity profile. » Continue Reading

GLP Pte Ltd.According to a GLP offering memorandum, in March 2022, CLH Ltd. entered into a share purchase agreement to transfer the 18% stake in GLP China to “its related corporation” and such a transfer was in progress as recently as September 2022. However, GLP guided during the call with Reorg that this transaction is part of a broader asset monetization plan with an external third party. » Continue Reading

Podcast: This week’s EMEA podcast includes discussions on the half-year report for 2023 on leveraged loans and high-yield bond covenants and what trends can be seen, key credit metrics trends for European automotive issuers and the market prices of their debt instruments, TalkTalk’s RCF lenders who are taking pitches from financial advisors ahead of 2024 maturity and primary market highlights.
​​​​» Listen on on Apple Podcasts
» Listen on on Spotify

Webinar Replay: In this webinar, John Han, partner at Kobre & Kim, joined Stephen Aldred and Malvika Joshi to discuss Azure Power, the potential event of default triggers, the delisting process and risks associated with it for the bondholders, and possible recovery scenarios and outcomes. » Watch the replay
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