WILMINGTON, Del. - Monday, 01. July 2024 AETOSWire
Over 80% of industry experts expect volume of restructurings to continue rising
Regulations favoring liquidation over rehabilitation seen as biggest challenge, with survival further hampered by inexperienced management teams and rising interest rates
North America and Europe experiencing significant restructuring
(BUSINESS WIRE) -- The volume of new corporate restructuring mandates is set to continue rising over the next two years as distressed companies grapple with geopolitical uncertainty, tightening interest rates, and new regulatory challenges, according to new research commissioned by CSC, the world’s leading provider of global business administration and compliance solutions.
CSC’s study1, Global Restructuring Trends in 2024: Navigating the Opportunities and Challenges, reveals that the overwhelming majority (83%) of sector professionals expect to see the volume of restructuring mandates grow significantly or modestly over the next two years, with a quarter (25%) predicting a significant increase.
CSC commissioned research among 150 independent senior executives in the global financial services, legal, private credit, and private debt sectors to shed new light on what’s driving the rise in global restructurings, as well as challenges facing the industry, and key regional differences.
“The acceleration in global restructurings builds on the rise we’ve seen over the past 12-24 months. In the U.K., for example, there were more than 25,000 registered company insolvencies in 2023, the most for 30 years,” says Michelle Dreyer, managing director of CSC’s Global Restructuring Practice.
“We’re seeing a number of companies that took on a considerable amount of debt during COVID and are now seeing that debt come due. But as rates are now so much higher, they can’t just go to their lender or a different lender and refinance,” Dreyer adds. “Some restructurings are actually companies that probably should have filed in 2020, but because they were so bolstered by the cheap money in the market, they’ve been able to hold out until now. We're now seeing the aftermath of all that inexpensive money.”
Two-thirds (65%) of industry experts said the biggest challenge to restructuring distressed companies was overcoming regulatory hurdles, which at times favors liquidation rather than rehabilitation. Other key challenges are inexperienced management teams (cited by 55% of respondents), which are unaccustomed to the transition from normal company operations to a very different and complex bankruptcy environment. Some 40% of respondents highlighted rising interest rates as a major driver in the restructuring market.
“Many individuals in management have little or no experience in dealing with the challenges of a systemic downturn,” adds Dreyer. “Management teams often have a difficult time transitioning from normal company operations to what is needed in a bankruptcy proceeding, meaning that the support of experienced providers who can move quickly to assist them becomes hugely valuable.”
CSC’s study identified North America and Europe as the two regions witnessing the most significant volumes of restructuring activity. Over 40% of those surveyed selected these geographies, with their mature regulatory frameworks making them attractive to companies from beyond their own borders.
“Regulatory changes can also have a positive impact on restructuring and make certain jurisdictions more attractive, resulting in the high use of COMI shifts,” says Dreyer. “Only a very small minority said they use just one independent external vendor during restructuring processes, highlighting the difficulty of finding a one-stop-shop during what are exceptional times for management teams. At CSC, we provide expertise from highly experienced professionals across a variety of products and a truly joined-up, global cross-border service.”
To receive a copy of CSC’s Global Restructuring 2024 report, please contact Camilla Wyatt or Saffron Wainwright at cscteam@citigatedewerogerson.com.
Notes to editors
1CSC, in partnership with Pure Profile, surveyed 150 senior executives in the financial services, legal, private credit, and private debt sectors globally to gauge views on the state of the global restructuring industry. Respondents were equally split between North America, APAC, U.K., and Europe.
About CSC
CSC is the trusted partner of choice for more than 90% of the Fortune 500®, more than 90% of the 100 Best Global Brands (Interbrand®), and more than 70% of the PEI 300. We are the world’s leading provider of global business administration and compliance solutions, specialized administration services to alternative asset managers across a range of fund strategies, transactions involving capital markets participants in both public and private markets, domain name system management and digital brand and fraud protection, and corporate tax software solutions. Founded in 1899 and headquartered in Wilmington, Delaware, USA, CSC prides itself on being privately held and professionally managed for more than 125 years. CSC has office locations and capabilities in more than 140 jurisdictions across Europe, the Americas, Asia Pacific, and the Middle East. We are a global company capable of doing business wherever our clients are—and we accomplish that by employing experts in every business we serve. We are the business behind business®. Learn more at cscglobal.com.
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Citigate Dewe Rogerson
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cscteam@citigatedewerogerson.com
CSC
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