Cynthia Romano, Senior managing director at FTI, discusses the economy's resilience, unique restructuring challenges in healthcare and real estate, and FTI's diverse services. Topics include market predictions, industry challenges in healthcare and cannabis, adapting firm strategies to economic conditions, and innovative financial structures amidst liquidity challenges.
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Quick takeaways
Despite economic challenges, significant liquidity in corporations and private equity postpones widespread restructuring.
Unique financing structures like securitization provide innovative solutions for distressed companies within existing credit agreements.
Deep dives
Economic Resilience Amid Dire Predictions
Despite dire predictions of a recession in 2022, various indicators painted a challenging economic landscape, such as geopolitical uncertainties, inflation averaging 7%, supply chain crises, and tight labor with rising wages. However, the presence of significant liquidity, including substantial cash reserves in large corporations and private equity, mitigated the expected recessionary conditions. This liquidity allowed companies to amend and extend debt, fund improvements, and enhance portfolio companies, delaying widespread restructuring and recessionary impacts.
Challenges in Tech, Commercial Real Estate, and Healthcare
The technology sector has faced challenges due to overleveraging during a period of low interest rates, leading to increased debt service without corresponding revenue growth, impacting private equity deals. Commercial real estate struggles with disparities between Class A and lower-grade properties, reflecting the lingering effects of remote work trends. Healthcare encounters systemic issues with declining revenues, rising costs, and reimbursement challenges affecting various subsectors, exacerbating access disparities and service quality gaps.
Creative Debt Management Strategies and Industry Trends
A trend in liability management evolution involves unique financing structures like securitization and double-dip financing, driven by private equity's need for liquidity in constrained environments. While lenders have scrutinized the legality of these structures, they provide innovative solutions within existing credit agreements to protect distressed companies. This trend is expected to persist as a response to liquidity constraints, showcasing lenders' acceptance and adaptation to unconventional but legal mechanisms in challenging financial landscapes.
This week, Reorg’s Dia Gill Joins Cynthia Romano, senior managing director at FTI, for a broad ranging discussion that includes the economy’s resilience in the face of dire predictions, unique restructuring challenges facing the health care, commercial real estate and cannabis industries, recent trends in liability management and how FTI is working to diversify its portfolio of service offerings.
Due to the Easter Holiday, we’re taking a short hiatus from our weekly summary of new developments in the restructuring world and our week ahead preview. Our full featured podcast will be back next week.
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#leveragedfinance #highyield #restructuring #performingcredit #distresseddebt #debtrestructuring #leveragedloans
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