The Distress Markets see opportunities

European Distressed Debt Market Outlook 2008

In the light of last summer’s subprime-triggered credit crisis, European investors are now licking their lips over a feast of potential stressed and distressed opportunities in 2008 and beyond, according to a new report by Debtwire, Rothschild and Cadwalader, Wickersham & Taft.

It appears that 2008 will see a marked increase in the number of corporate restructurings in light of deterioration in economic conditions.

Andrew Merrett, Managing Director and Co-head of European Restructuring at Rothschild in London comments: "The lack of liquidity from the major commercial banks has caused the subprime crisis to spread far wider. The refinancing option is much harder for many corporates and those in difficulty will need to restructure, raise equity or sell assets."

Richard Nevins, a Partner at Cadwalader, added: "The increase in restructuring activity previously anticipated to become pronounced by late 2008 now appears to have accelerated due to the emerging indicators of a downturn occurring in the wider economy as well as in the credit and financial markets".

Key Findings:

• Distressed investors are targeting higher returns in 2008 than in 2007.
  
  
• The severity and timing of any deterioration in the economic climate is expected to determine when the wave of distressed credits breaks
  
  
• According to 59%, the middle two quarters of 2008 will witness a substantial increase in stressed or distressed credits as economic conditions bite.
  
  
• The origins of the credit crunch in the US subprime meltdown are expected to be mirrored by hard times ahead in European real estate – both commercial and residential.
  

Indeed, the Property, Financial Services and Construction sectors will offer most opportunities for distressed investors in 2008.

Credit Man