FACTBOX: Distressed investing outlook for 2009

NEW YORK (Reuters) - Corporate bankruptcies and restructurings are expected to soar this year as dwindling revenues and tight lending markets force companies ranging from retailers to casinos and home builders to make tough changes or shut their doors.

Following are comments from some of the top U.S. restructuring experts on the outlook for distressed investing in 2009, including the potential for mergers and acquisitions and predictions on the availability of debtor-in-possession financing.

JAMES SPRAYREGEN, PARTNER AND BANKRUPTCY ATTORNEY, KIRKLAND

& ELLIS, CHICAGO

"Where DIP financing is not available, and where liquidity is an issue, that will force some accelerated M&A processes. I think we're going to see a significant increase in activity in that area in 2009."

BRYAN MARSAL, C0-CHIEF EXECUTIVE OFFICER, ALVAREZ & MARSAL,

NEW YORK

"DIP will start to ease up, but smart people will start to offer DIP financing at very expensive prices and with lots of conditions that didn't exist in the past."

FRED CRAWFORD, CHIEF EXECUTIVE OFFICER, ALIXPARTNERS, NEW

YORK:

"We may see an increase in M&A activity just because there are fewer good (alternative) options available. You may see companies merging together with the idea that 'If we can get very efficient with the cost structure with a combined company, we can see our way through these tough times.'"

"I anticipate that the role of private equity will shift, at least in intermediate term, from financial engineering to operational engineering. There will be more of a buckling down to improve the operations of a portfolio company."

"I think the first quarter and probably the first half of 2009 will continue to see a very difficult market for DIP financing. Many of the traditional lenders are either sitting on cash or trying to build a larger cash position or making the terms available pretty onerous. We unfortunately expect that the first half of '09 will continue like the second half of '08, where it's tough to get financing."

MARK SHAPIRO, HEAD OF RESTRUCTURING AND FINANCE GROUP ,

BARCLAYS CAPITAL, NEW YORK

"Financing markets right now are really driving the lack of appetite for assets at the moment. Maybe if liquidity starts to loosen up a little bit and if people have greater visibility into what 2009 will look like, then people may be more confident in buying assets. But right now people are looking at things from a very distressed standpoint -- so they're willing to buy things but only at a really distressed price."

CORINNE BALL, PARTNER AND CO-HEAD OF NY RESTRUCTURING AND

REORGANIZATION PRACTICE, JONES DAY, NEW YORK

"(If possible acquirers of distressed companies) insist on acquisition through Chapter 11, it may be safer for them in terms of the cleansing impact. If I don't want to pick up a defined pension plan or a retirement plan, I can do a going concerns asset sale in Chapter 11 and walk away from it. If there are environmental issues in operations I have no interest in, then it's a tremendous way to extract diamonds from companies that have grown over time or have too many business lines to succeed in a difficult environment."

BILL WEINSTEIN, CHIEF INVESTMENT OFFICER, GORDON BROTHERS,

BOSTON

"Certainly (with) the amount of liquidations that are going on ... We (as liquidators) will be busier than presumably we ever have. In terms of the amount of product that needs to get liquidated, or inventory or machinery or real estate, certainly that inventory in our opportunity base is certainly going to be significantly grown.

"But on the other side, not only do we acquire these assets, we also need a place to sell them. But with a lack of credit and what's going on in the marketplace, we are also finding it harder to sell some of the assets that we are given the opportunity to purchase."

"I think capital (to invest in distressed companies) will come back slowly. I think it will loosen up very early on in the second quarter if not late in the first quarter."

RANDALL EISENBERG, SENIOR MANAGING DIRECTOR, FTI CONSULTING,

NEW YORK

"The auto industry will continue to transform itself. There will be additional consolidations and liquidations in the supply base."

"Retail will see the most dramatic fallout in recent years. There will be numerous bankruptcies and liquidations. Vendors will maintain tightened terms for those retailers that fail to demonstrate adequate financing and performance. Lenders will monitor their investments carefully to ensure they remain well-protected from a collateral perspective."

"Commercial real estate will see a greater adversity in 2009. Corporations will both downsize and seek rent concessions, placing further pressure on landlords."

ROBERT MCMAHON, MANAGING DIRECTOR FOR RESTRUCTURING, GE

CORPORATE LENDING, NORWALK, CONNECTICUT

"I do believe that many of the private equity firms' hypotheses, as it relates to their investment strategy initially, will be tested. So if you came to invest a disproportionate about of money at a leverage multiple that might have been aggressive at the time, with the expectation that you can cut costs or grow the revenue line, you're going to find out whether those assumptions were correct or not and in many cases we're going to find out they probably weren't. As a result I think a lot of the PE firms will feel a lot of pain this year."

(Reporting by Chelsea Emery, Emily Chasan and Caroline Humer, editing by Matthew Lewis)