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Insolvency uptick?

Late July 2007's market shocks, when the Dow, FTSE and other indices slipped 5% or so on the back of the US sub-prime collapse spreading to prime homeloans and - some feared - into the corporate bond and credit markets, suggested that the wall of cash fuelling the recent credit boom was subsiding.

Such an outcome was not entirely unforseen, as reported here by Reuters in early June in an article highlighting a dramatic switch in worldwide corporate insolvency levels, from a 17% reduction in 2006 to 7% growth in 2007.

The last few days have seen faltering LBOs and a reluctance amongst banks to participate in recently planned syndications. The covenant-lite loan is said to be history and rising interest rates and oil prices encouraged market jitters.

Alongside this, investment banks, turnaround boutiques, lawyers and accountants are busy hiring restructuring talent and experience.

Will there be an insolvency boom? Not in my judgement. But there will be enough of an uptick to keep the skilled, flexible and client-oriented restructuring professional busy.



Date: 6th August, 2007
Author: Chris Laughton


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