Restructuring firms preparing for more demand

By Steve Eder

NEW YORK (Reuters) - Restructuring industry firms are bolstering their ranks, preparing for sustained demand for their services over the next three to five years as companies continue to struggle with an overhang of debt, industry executives told the Reuters Restructuring Summit this week.

Lagging housing prices, high unemployment, and the billions of dollars of debt piled onto corporate balance sheets in the last decade are all contributing to the continued need for restructuring and bankruptcy help, keeping the industry busy as it works through the second year of its latest wave.

"The levels of defaults and problems continue on," said Barry Ridings, vice chairman of U.S. investment banking at Lazard Ltd (LAZ.N). "There are, in my mind, some systemic problems which will lead to a continuation of the need to restructure."

Executives do not see an end to the wave in the near term, predicting it is possibly three to five years off, so executives said they are continuing to hire bankers in anticipation of prolonged need. The exact staffing numbers on the restructuring side are closely guarded because of the competition in the industry, but signs are pointing upward.

Henry Miller, the chairman and co-founder of restructuring investment bank Miller Buckfire said his firm began to stockpile restructuring talent in 2002 in anticipation of a looming cycle -- and it continues to hire.

"We have always invested in people well in advance of need," Miller said. "Our view from the get-go would be that there would be another cycle. We didn't predict Armageddon, but we expected there would be more cycles -- and our view was that it takes five to seven years to train a good restructuring team."

The executives said they expect the current restructuring wave to continue for up to three more years in large part because of the massive amount -- as much as $1.3 trillion -- of maturing debt before 2014.

"Certainly based on the way the capital markets are performing today and more significantly the relative absence of lending by the large commercial banks to the non-investment grade sector, it is hard to see how all of that debt can be refinanced," Miller said.

Executives said the past year, which saw the near-collapse of the financial services industry and the automotive sector, were particularly busy.

"In January and February we were so busy and everything was a disaster," said Bill Derrough, co-head of the recapitalization and restructuring group at investment bank Moelis & Co. He said that although the debt and equity markets have improved lately, there is still a long way to go.

"When you're restructuring guys, maybe you tend to look at the glass being half empty," Derrough said at the summit.

"But the rhetoric out there about things being better is not matched by the reality on the ground."

(Editing by Gary Hill)