Counsel to Counsel - May 2008 - (Page 12)

global perspectives and sold as opposed to classic longterm workouts. And, perhaps most significantly, an increasingly diverse array of lenders with frequently diverging interests is now in play. Hidden Agendas As in any downturn, the next year or two will bring higher loan default rates and a general increase in corporate debt restructuring. But it’s increasingly difficult to tell who the real creditors are and what drives them. ©iStockphoto.com/Mark Gabrenya DistressedDebt New Players, Global Sophistication Make Restructuring More Complex By Steven Andersen “ ntheolddays—the I ’90s—itwaspretty simple.Notanymore. Theplayersup,down andoffthebalance sheetareanybodyand everybody,andyou don’talwaysknow theirmotivation.” “In the old days—the ’90s—it was pretty simple,” Reilly says. “Not anymore. The players up, down and off the balance sheet are anybody and everybody, and you don’t always know their motivation. Somebody might be talking like a senior lender, but might also hold a big position in the junior debt. You can’t go into a workout thinking it’s nice and simple like it used to be.” Until fairly recently, business lending was fairly cut-and-dried. Commercial banks did short-term revolving-credit deals, while insurance companies and mutual funds took care of longer-term debt. Those traditional lenders are regulated, and their role in a restructuring is usually clear. Banks are in the business of making loans. Insurance companies’ mission is to stand behind their W hen markets are flush, borrowers have it easy. Throughout the middle of this decade, companies had little trouble getting loans with low interest rates and lots of latitude. Those days are gone. “Banks, investment banks and hedge funds are losing money hand over fist on subprime mortgages,” says Michael J. Reilly, co-chair of the Financial Restructuring group at Bingham McCutchen. “They’re writing off assets. They’re eating into their own capital. Their business is actually shrinking. All that combines to make them more conservative.” That lenders are more cautious in an economic downturn is a matter of course. But each economic cycle brings new wrinkles, new complexity. Those changes are most apparent when companies lose cash flow or find financial performance declining and need to restructure debt. Global insolvency regimes are more sophisticated than ever before. Bankruptcies are faster, with distressed companies bought 12 LexisNexis® Martindale-Hubbell® http://www.iStockphoto.com/Mark

Table of Contents Feed for the Digital Edition of Counsel to Counsel - May 2008

Counsel to Counsel - May 2008 Contents Harassment Policies NEC Corporation of America and Duane Morris LLP Lost or Stolen Data: Minimizing Fallout On-Boarding the Board Drafting Fair, Efficient and Enforceable Arbitration Agreements Responding to Counterfeit Products Crafting an English-Only Workplace Policy Distressed Debt: New Players, Global Sophistication Make Restructuring More Complex IP Confidential: Plan Ahead, Act Fast to Protect Your Trade Secrets Adverse Changes: Think Ahead in a Strained M&A Market Optimizing Web 2.0 Technology: Expanding Your Professional Network Union Pacific Railroad Company and Patton Boggs LLP Warming Warning: Develop Your Climate Change Strategy Now Risk Sharing: Expect New Obstacles and Expenses in Syndicated Loans E-Discovery in Action Diversification at the Gate Energy

Counsel to Counsel - May 2008

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