Restructuring activity set to decrease further in 2015 for the UK banks, while activity expected to continue in Europe
27 January 2015
The vast majority (89%) of UK banking institutions expect to see a fall in restructuring activity this year, according to the business advisory firm, Deloitte. This follows another quieter year for restructuring, when 83% of UK banks saw the volume of cases decrease in 2014. Meanwhile two thirds of respondents saw an increase in exits via refinancing, and over half in exits via a business sale, as the M&A markets recovered.
Nick Edwards, head of restructuring at Deloitte, commented: “The relative health of the UK economy, and the action banks have already taken on deleveraging, will keep restructuring levels down. We have also seen a retreat from big corporate lending, and a renewed focus on retail banking. While the system is relatively robust, there could be future restructuring activity in retail and education, as well as in energy as a knock-on from falling oil prices.”
In Europe, half (51%) of banking institutions saw a decrease last year and 42% expect restructuring activity to remain flat this year. However over two thirds (71%) of alternative lenders, who have been increasingly active in this area, expect to see an increase in restructuring activity in the UK and Europe.
Andrew Grimstone, head of global restructuring services at Deloitte, said: “The picture in the rest of Europe is not as settled as the UK, and we would side with the forecast of the alternative lenders. There are plenty of issues likely to drive restructuring activity in Europe.
“The effects of regulation have not worked their way through yet and AQR tests are only the start of stricter regulatory regime. The European Central Bank’s forbearance rules are likely to prompt action by European banks to deal with non-performing loans and deleveraging will drive further restructuring, as investors work through their portfolios.
“We have already seen that some high-yield structures are vulnerable (such as with Phones 4U) where bonds were taken on to replace bank debt but the businesses have failed to address underlying strategic or operational issues.
“Other factors creating uncertainty are geopolitical risks, for example tensions in the Ukraine and Russia, or the aftermath of the Greek elections. Events in the financial markets can also lead to increased volatility, such as the change in the value of the Swiss Franc ahead of the recently announced quantitative easing.”
Deloitte interviewed 80 senior restructuring professionals from banks and alternative lending institutions across the UK and Europe.
Notes to editors
In this press release references to Deloitte are references to Deloitte LLP, which is among the country's leading professional services firms.
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The information contained in this press release is correct at the time of going to press.
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