FICC Focus Houlihan Lokey's Hardie on Yet-to-Crest Wave of Distressed Debt: State of Distressed Debt
Mar 9, 2024
William ‘Tuck’ Hardie, a Managing Director at Houlihan Lokey with over 20 years of experience in financial restructuring, discusses the rising wave of distressed debt driven by post-pandemic rate hikes. He shares insights on liability management transactions and the shift towards out-of-court restructuring. Tuck emphasizes the role of private credit and CLOs in prolonging distress scenarios. He also highlights the importance of monitoring creditor relations and the cyclical nature of current market vulnerabilities, including sectors like healthcare and telecom.
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Interest-Rate Shock Is The Primary Driver
- Many good companies are now struggling because balance sheets built during free-money era face ~550bp higher rates.
- William ‘Tuck’ Hardie says interest-rate shock, not business quality, drives current restructurings.
Liability Management Has Replaced Court First
- Liability management (LMEs) is the new out-of-court restructuring default: defer or reshape reality today.
- Hardie warns creditor-on-creditor leapfrogging will invite litigation and likely become less common.
Track Who Owns The Paper
- Monitor trading to see who accumulates your credit and their incentives before deals move.
- Stay aware of fellow creditors' exposure across a sponsor's portfolio to anticipate divergent aims.