Making Sense Debt Restructuring: Recent trends, insights and market dynamics
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Feb 18, 2025 Dan Pombo, managing director at J.P. Morgan, brings his expertise on the evolving landscape of debt restructuring. He discusses the surge in out-of-court restructurings and the shifting dynamics between loan and bond markets. Pombo highlights the strategic advantages of selecting a well-known financial institution and dives into the implications of permissive covenants amidst rising interest rates. He also shares insights on the upcoming Leverage Finance and High Yield Conference, emphasizing its role in fostering connections and knowledge within the restructuring community.
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Elevated Default Environment
- Leveraged loan and high-yield bond markets face elevated default rates, exceeding typical non-recessionary levels.
- Speculative credits struggle to refinance due to higher interest rates and industry challenges.
Shifting Restructuring Trends
- Loan market defaults now exceed bond market defaults, contrary to historical trends.
- Out-of-court restructurings surpassed in-court restructurings for the first time in 2024.
Drivers of Restructuring Trends
- High Chapter 11 professional fees reduce creditor recovery.
- Permissive covenants allow companies to move assets, hindering existing creditors.