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NEW YORK, Jan 12 (Reuters) - Some of the top U.S. restructuring and bankruptcy advisors see a busy year ahead 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 experts' comments on the outlook for the restructuring industry, the lending environment and the sectors that are most likely to struggle in 2009.
BRYAN MARSAL, CO-CHIEF EXECUTIVE OFFICER, ALVAREZ & MARSAL, NEW YORK:
"I think there's going to be a tsunami of restructurings."
"This is the time of the long winter. Two years of very tight money -- bank financing -- and then two years of gradual pullout. That's a four-year time horizon. Everyone talks this silliness about the back half of '09. They're smoking something. They've got to be kidding me. What are they seeing? We're seeing the long winter coming in.
"I think they (banks) are going to have significant category hits, which are going to cause (them) to continue to be very cautious about lending. In 2009, as they recharge their battery and see that this is behind them; you will start to see lending, beginning in 2010, to loosen up just a bit, not a lot."
DAVID RESNICK, CO-HEAD OF INVESTMENT BANKING, ROTHSCHILD, NEW YORK:
"There's a level of uncertainty hanging over the entire capital markets and until that starts to change, it's going to be a difficult period for many companies, particularly those in industries that are more severely challenged, like retail and automotives, and anything GDP-related."
"For retailers the first quarter is going to be very difficult. Many of these companies have revolving credit facilities and often the advance rates are higher during Christmas because the inventory is fresher and lenders are willing to allow the retailers to borrow more. Post-Christmas, those advance rates in some cases snap back, so that creates a liquidity challenge. That's why you are seeing so many sales and people trying to get their inventories down. I think some retailers are going to run into liquidity issues as they go through the year."
BARRY RIDINGS, VICE CHAIRMAN OF US INVESTMENT BANKING, LAZARD, NEW YORK:
"When consumers cut back on spending it's going to negatively affect several industries. We've already seen the effects on restaurants, a number of which have filed for bankruptcy. I think we're also likely to see a lot more retailers experience problems in the coming months. In the automotive sector, the next few months for both the OEMs (car makers) and the auto suppliers are going to be critical. Another example of this consumer-led restructuring cycle is the casino industry, which is almost entirely being restructured."
"2009 is going to be one interesting year."
MARK COHEN, GLOBAL HEAD OF RESTRUCTURING AND WORKOUT, DEUTSCHE BANK, NEW YORK:
"I think people are oversimplifying how difficult it will be and how long it will take for these companies to restructure ... The vast majority of companies in distress will have to get through the restructuring phase of delevering itself before it will be in a position to sell itself."
"To achieve a controlling position through a restructuring is quite difficult, and laborious and you'll probably see more talk about it than actual success."
FRED CRAWFORD, CHIEF EXECUTIVE OFFICER, ALIXPARTNERS, NEW YORK:
"It looks as though the acceleration of bankruptcy filings that we saw in second half of 2008 is going to continue."
"There are four to five (industries) that are standing out in terms of our analysis -- auto parts, media and entertainment, transportation industry and surprisingly, the packaging industry. Anything that involves the creation of corrugated boxes or polyurethane packages. Those companies that are, generally speaking, a little smaller and have less ability to take a hit because they're asset intensive industries, are particularly vulnerable to a downturn in consumer demand."
"You've got a fair amount of debt on smaller companies in the trucking industry, so I expect that'll be a segment to get hit pretty hard."
CORINNE BALL, PARTNER AND CO-HEAD OF NY RESTRUCTURING AND REORGANIZATION PRACTICE, JONES DAY, NEW YORK:
"One thing people are worried about is commercial real estate."
"Companies may, in fact, permit their exclusivity to expire in Chapter 11, stay there and work with their constituents on what would be a more sensible exit. That probably will be a way of waiting for a better M&A environment because right now it's not good."
"There may be some deals in which, to keep operating, they'll change control for very, very little consideration. We've certainly seen it in financials, we're going to see more."
HENRY MILLER, CO-CHAIRMAN OF MILLER BUCKFIRE & CO, NEW YORK:
"You have a whole different sector that most people don't talk about, which is all of the others who have financing that is maturing -- from mundane plain vanilla accounts receivable and working capital financing to bonds to maturing term loans -- and there is no credit market"
"I think what you are going to find is it will create surprise bankruptcies. And the situation where companies would typically file for bankruptcies with some preparation and a DIP financing that was ready to go so that the liquidity necessary to run the business day to day would be available at least in bankruptcy proceeding, now that is not necessarily clear. So you have uglier situations of fire sales and potentially a lot more liquidation."
MARK SHAPIRO, HEAD OF RESTRUCTURING AND FINANCE GROUP, BARCLAYS CAPITAL, NEW YORK:
"You're seeing a lot of contraction at a lot of companies on the job front. If there is a continuation of job losses, you could have a deterioration in the economy because consumer demand won't be there. The big question is the government stimulus package that is being discussed and the number of jobs that will be created."
BILL WEINSTEIN, CHIEF INVESTMENT OFFICER, GORDON BROTHERS, BOSTON:
"I do believe that out-of-court (restructurings) will be more common. We are a firm believer in the scenario where if you can affect an out-of-court, you are better off. If all the parties of interest are aligned, you can, in essence, do everything you need to do out of court just as well as in court."
JAMES SPRAYREGEN, PARTNER AND BANKRUPTCY ATTORNEY, KIRKLAND & ELLIS, CHICAGO
"There's going to be a premium on figuring out how to do out-of-court restructurings. You have a lot of situations where companies are generally healthy, they're just overlevered, and if all the constituents can cooperate, we can save a lot on transaction costs in getting an arrangement done without a court proceeding." (Reporting by Chelsea Emery, Caroline Humer and Emily Chasan)
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