iGlobal’s annual Global Distressed Debt Investing Summit, held yesterday, lived up to its reputation as a venue to hear the latest thought leadership about distressed debt investing. The day opened with a keynote by Perry Mandarino (PWC) and then moved right into Mandarino’s interview of Bruce Richards (Marathon Asset Management).
One takeaway: Richards predicted that while bankruptcy filings in the United States will remain fairly low in terms of the number of companies filing, the amount of debt being restructured will continue to be significant.
The first panel, “Exploiting the Distress in Energy-Related Credits,” featured Harlan Cherniak (KKR Asset Management), Stuart Lissner (Apex Fundamental Partners, LLC), Vladimir Jelisavcic (Bowery Investment Management), Jonathan Lurvey (Blackstone), Andrew Ragsly (Debtwire) and Joseph Smolinsky (Weil Gotshal & Manges). The prevailing view seemed to be that although about a quarter of loans in the energy sector are trading at distressed debt levels, bankruptcies may be slow to come because of the common flexibility in their credit documents to permit new layers of capital to come in on top of existing debt. More than one panelist likened the situation to the telecom bubble of about a decade ago.
Mahmoud Atalla (HSBC) then led a panel with Marcus Giancaterino (Citibank), Khing Oei (Eyck Capital) and Dan Pine (Marathon Asset Management) which, although it was ostensibly designed to speak to opportunities in Europe, suggested that opportunities may actually be richer elsewhere.
The domestic retail sector was the topic of discussion during the last morning session, with Greg Segall (Versa Capital Management) kicking it off by suggesting that it is not too hard to imagine that 100,000 or more of the 1.5 million retail establishments in the United States may be unnecessary. He set the tone for this entertaining panel by noting also that he assumed most of these are Radio Shack locations.
Mr. Segall’s basic premise was that there are simply too many retail establishments in the United States, there have been too many for a long time, and the rise of e-commerce should not be viewed as the single cause of the demise of a retailer. What followed was a spirited discussion, which included Aaron Rosen (Archview Investment Group), Anthony Chukumba (BB&T Capital Markets), David Tawil (Maglan Capital) and Lawrence Gelber (Schulte Roth & Zabel) about what they think some retailers are doing right and what some retailers are doing wrong.
Mr. Chukumba pointed to Williams Sonoma as a poster child for executing a “best in class” omni-channel integration of its retail stores, its paper catalog, and e-commerce. As a counterpoint, Mr. Chukumba held up Bed Bath & Beyond as a company which is at risk because of its very large brick and mortar footprint, its lack of a unique product offering, and its failure to invest into e-commerce (noting that less than one percent of its sales comes from e-commerce).
Mr. Segal also pointed out that the recent bankruptcies of several large retail clothing chains may put downward pressure on the inventory appraisals of competing retailers.
Following lunch, there were some equally interesting afternoon panels. Tanir Helayel (PMD Capital Management), Robert Amodeo (Western Asset Management), and George Schultze (Schultze Asset Management) discussed opportunities in emerging markets. Mr. Helayel spoke at some length about Brazil. Did you know that 50% of disposable income of the typical Brazilian consumer today goes towards debt service?
Soren Reynertson (GLC Advisors), Marc Puntus (Centerview Partners), Ronen Bojmel (Guggenheim Partners) and O’Malley Hayes (Bayside Capital) rounded out the day, with a discussion of the re-financing markets.
A day well spent! Kudos to iGlobal for putting together another excellent conference.