March 5, 2010 / 9:17 PM / in 8 years

Blackstone's Coleman sees new restructuring wave

NEW YORK (Reuters) - Strong demand for corporate debt may help companies avoid restructuring and bankruptcies now, but another wave of reorganizations likely will come in a few years, Blackstone Group’s (BX.N) co-head of restructuring Tim Coleman said on Friday.

Coleman expects corporate default rates to be lower in 2010, in part because of strength in the high yield market that allowed many companies to “amend and extend” debt maturities that may have been scheduled to come due this year or soon.

“Amend and extend does not fix the company. It just pushes out maturity dates,” Coleman told Reuters in an interview.

“My prediction is we will see 2010 be a very big year - not as big as 2009. 2011 will be slower and then we’ll hit the wall of high yield debt from ‘05-‘06-‘07. If GDP grows as predicted, there are companies that will not grow out of their problems,” Coleman said.

Blackstone, best known as a private equity firm, also provides financial advice for areas including restructuring. Coleman, who has worked at Blackstone for about two decades, has worked on some of the sector’s biggest turnarounds including Delta Air Lines (DAL.N) and Xerox Corp (XRX.N).

The global credit crisis and economic downturn have pulled many sectors into bankruptcy during the past 18 months, including finance companies, retailers and auto and car parts makers.

Sectors that will continue to be weak this year include commercial real estate, casinos and media, Coleman said.

    Commercial real estate has been pressured as owners grapple with large debt loads amid declining values, as seen in the bankruptcies of General Growth GGWPQ.PK and Extended Stay ESAIN.UL among others.

    Casinos have run into trouble as a result of the real estate crash and decrease in consumer demand for gambling amid the downturn. Many media companies, meanwhile, are dealing with fundamental changes in how they make money.

    While there has been a lot of money raised for distressed debt investing in the past several years, much of it seems to be focused on areas like debtor-in-possession financing and exit financing, he said.

    “I think if you asked most distressed investors they would complain that the trading level of most debt is very high,” Coleman said.

    Reporting by Caroline Humer. Editing by Robert MacMillan

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