Debtwire Unveils 2008 Distressed Debt Outlook for North America

Survey Participants Predict Moderate Climb in Default Rate, Sharp Increase in
Hedge Fund Liquidations; 70 Percent of Prop Desks Predict Recession

NEW YORK, Jan. 15 /PRNewswire/ -- Debtwire, the leading distressed debt
and leveraged finance real-time news and data service, today announced the
findings of its 2008 Distressed Debt Market Outlook for North America survey.
The study, published in conjunction with Bingham McCutchen LLP, FTI
Consulting, Inc. and Macquarie Securities (USA) Inc., highlights major issues
and trends facing the North American distressed debt market in 2008 and
includes the expectations of market participants.
While most traditional investors look for companies on a growth track,
distressed specialists focus on the darker side of the economy. They track
industries and corporations that are poised for collapse or those that have
already fallen and are undervalued as a result. Nearly three-quarters of
respondents said they plan to place more of their assets in distressed debt in
2008.
Debtwire interviewed 101 of the largest distressed-debt market
participants to gauge their outlook for 2008. Continued market decline is one
of the major trends of study, with 70 percent of proprietary trading desks
predicting a recession, and none ruling one out. Fifty-seven percent of hedge
funds said they expect a recession, and 43 percent of institutional investors
agreed.
"We've already seen a brisk pick-up in the fourth quarter of 2007 of
commercial loan and bond restructurings beyond the subprime and asset-backed
defaults we saw all summer," said Michael Reilly, co-leader of Bingham's
Financial Restructuring Practice Group. "Distressed debt momentum is building
rapidly because lenders who were hammered in the asset-backed markets in 2007
are now forced to be more conservative in the commercial markets in 2008."
According to Ken Meehan, Editor of Debtwire, North America, "The days of
easy corporate credit and wide-spread issuer friendly concessions aren't
coming back anytime soon. Refinancing opportunities and economic growth are
both expected to erode in 2008, prompting expectations of a substantial
increase in the amount of capital distressed debt investors plan to allocate
to the asset class. However, unlike the beginning of past cycles when
distressed securities were abundant and specialized investors were relatively
few, this time around there promises to be much more competition among a wider
pool of prepared professionals."
"The potential fallout from a sustained contraction in corporate credit
markets could be worse than in previous cycles because many more large U.S.
companies have borrowed aggressively and are financially vulnerable, judging
by the overall distribution of corporate credit ratings and the preponderance
of "deep junk" issuers, commented DeLain Gray, leader of FTI Consulting's
Corporate Finance Practice. "Borrowers will still have access to capital, but
many of the more highly leveraged credits will be shut out of traditional
borrowing channels. For distressed investors, such a scenario spells
opportunity," adds Gray.
Mick Solimene, Managing Director, Macquarie Securities (USA) Inc., added,
"There is clearly a sizeable and growing interest in distressed debt investing
going into 2008. The euphoria we've seen in the buyout market over the past
few years is clearly muted at the present time. As the liquidity chill takes
longer to thaw, distressed debt investors will have greater capital to work
their way through an increasing supply of distressed opportunities in 2008."
Among the other survey findings:
-- The ratings agency predicts a spike in the default rate over the next
12 months to 4.2 percent, while survey participants expect a moderate
climb, with 39 percent of respondents anticipating a default rate
between 2-3 percent by the end of 2008, and 47 percent of respondents
expecting a 3-4 percent rate.
-- Three-quarters of those surveyed believe that hedge fund liquidations
will increase in 2008, with roughly 10 percent of respondents to the
2008 Outlook predicting a 50-75 percent risk of systematic shock,
compared to zero in last year's study.
-- Two-thirds of participants picked financial services as one of the top
three sectors offering the greatest distressed investing opportunities
in 2008. Almost three-quarters listed first-lien loans among the three
most attractive instruments for the next year. Only 17 percent singled
out the loans as one of the three least attractive investment
opportunities.

The full survey is available at www.debtwire.com.

About Debtwire
Debtwire publishes real-time news and data for financial professionals in
the distressed debt and leveraged finance markets across the world. Debtwire
is part of the Mergermarket Group which has more than 400 employees worldwide
and regional head offices in New York, London and Hong Kong. Visit us at
www.debtwire.com.
The Mergermarket Group is a division of the Financial Times Group,
publisher of the Financial Times newspaper, FT.com, Expansion and FT
Deutschland. The FT Group is a division of Pearson plc, the international
media group. Visit us at: www.mergermarket.com.
About Bingham McCutchen LLP
With 1,000 lawyers in 13 offices worldwide, Bingham McCutchen LLP,
www.bingham.com, is a national law firm with global capabilities. The firm
represents clients in financial restructuring, high-stakes litigation, complex
financing and regulatory matters, government affairs, and a wide variety of
sophisticated corporate and technology transactions.
About Macquarie
The Macquarie Group (Macquarie) is a diversified international provider of
banking, financial, advisory and investment services, with approximately
US$200 billion of total assets under management (as of September 30, 2007).
Headquartered in Sydney, Australia, Macquarie Group Limited (ASX: MQG) is a
top 20 company listed on the Australian Securities Exchange with a current
market capitalization of over US$19 billion.
Macquarie has been active in the Americas for over a decade, establishing
its first office in New York in 1994. Today Macquarie has more than 1,500
staff in 25 locations in North and South America. Macquarie continues to grow
its North and South American activities by expanding existing businesses,
forming joint ventures with local partners and making niche acquisitions
About FTI Consulting
FTI Consulting is a global business advisory firm dedicated to helping
organizations protect and enhance enterprise value in an increasingly complex
legal, regulatory and economic environment. With more than 2,400 professionals
located in most major business centers in the world, we work closely with
clients every day to anticipate, illuminate, and overcome complex business
challenges in areas such as investigations, litigation, mergers and
acquisitions, regulatory issues, reputation management and restructuring. More
information can be found at www.fticonsulting.com.
SOURCE Debtwire

Karishma Thakkar of Mergermarket Group, +1-212-686-6305 for Debtwire,
karishma.thakkar@mergermarket.com; or Amy Rosenberg for FTI Consulting,
+1-212-850-5615. Amy.rosenberg@fd.com; or Claire Papanastasiou of Bingham
McCutchen LLP, +1-617-951-8881, claire.p@bingham.com; or Paula Chirhart of
Macquarie, +1-212-231-1239, paula.chirhart@macquarie.com