Bankruptcy advisors hiring extra staff


According to Financial Times, fears that the current global credit boom could lead to a surge in business failures has caused companies such as PWC, the largest corporate recovery advisor, to hire additional insolvency specialists. Here is a direct quote from the Financial Times article:

"Unusually loose lending conditions have encouraged record borrowing by speculative-grade companies, with leveraged buy-outs and debt refinancing on both sides of the Atlantic generating more than $100 billion of deals in the past eight months.

"But last week's fall in the price of US Treasury bonds, coinciding with signs that bankers are struggling to complete riskier corporate bond issues, has added to a sense of nervousness in some quarters.

'Although corporate default rates remain low, some fear the legacy of recent private equity buy-outs and hedge fund investments in distressed debt will be a swath of over-leveraged companies ill-equipped to survive in less benign conditions."

Finally, somebody is noticing what's going on in the financial world! It's curious how we don't see such news being reported in American business newspapers.

Ian Powell, an executive at PCW, put his finger directly on the most critical aspect of the credit bubble problem when he noted that if only one of the really big leveraged buy-outs "goes sour," "confidence will evaporate very quickly." That's a nice way of saying there will be a panic, which could lead to what is the worst possible scenario: debt deflation. Were that to happen, the ensuing crisis would assume catastrophic proportions.

Posted: Sun - March 13, 2005 at 05:11 PM          

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