WSJ Publishes Phil Dublin Piece on the Future of Corporate Restructuring
The Wall Street Journal’s Bankruptcy Beat blog has published the first of an ongoing series of articles by Akin Gump financial restructuring partner Philip Dublin. In this instance, he addresses corporate restructuring’s current situation, with chapter 11 filings at historic lows due to near-zero interest rates and extended debt maturities.
Dublin maintains that the current climate “is analogous to a patient in a drug-induced coma who will, in due course, emerge from that coma, as opposed to being on life support.” He believes that corporate restructuring is cyclical, so that “interest rates will eventually increase, corporate indebtedness will eventually mature and certain companies will be unable to satisfy their debts for various other reasons.”
However, he also believes that, when the situation cycles back, it will not be at the same level of robustness that it was in the period following Lehman Brothers’ bankruptcy filing, and “true ‘mega’ Chapter 11 filings will be fewer and farther between” due to availability of capital.
Dublin notes that there will be exceptions and “industries that struggle regardless of capital availability” and spotlights one potentially impactful variable: the “extent to which hedge funds will continue to provide new capital to distressed companies.” While recognizing that many funds have substantial liquid assets, he also notes that it has “also become a difficult time for hedge funds to raise new capital,” and they are correspondingly less eager to “throw good money after bad in a distressed situation.” This, he notes, could have the effect of waking the “patient more quickly.”