By Hedge Fund Insight staff
At today’s Capital Connection Forum in London Distressed Investing in Europe was in focus. These are the takeaways. First as reported on Twitter –
- Brexit impact on UK legal services – “England is not being chosen as a venue to settle legal disputes” says Howard Morris of Morrison & Foerster.
- Shipping is a rare area of increasing NPLs for German banks according to JLL
#NPLs #GermanBanks #DistressedInvesting
- It is indicative of conditions in UK that restructurings are taking much longer to get refinanced – was 14 days now 7 weeks
#DistressedInvesting (quoting Howard Morris)
- European hedge funds are turning to funding complex litigation say leading lawyers
#hedgefunds #DistressedInvesting (because current purchase costs of distressed assets requires asset values to keep on rising generally, making distressed debt/equity too risky)
Other key points made:
The retreat of UK banks from domestic lending has left opportunities for others to step in. For example bridge finance for real estate development loans yields 12/13%to lenders, even when collateralised.
High-end Kensington & Chelsea residential property prices are off 15%, and one speaker is looking for that sector to fall another 15%.
Defaults amongst SMEs may be higher than loans to large UK corporates, but the recovery rates are better.
A UK sector that is expected to offer opportunities to purchase or turnaround distressed assets is the retail sector. Further down the road second-hand car values will come under pressure because of government policy and the move to electric vehicles. Impacts could be in specialist insurers and leasing companies.
German banks are looking to sell of non-core assets, meaning loans made outside Germany.
The opportunity to look at Greek NPLs as potential investments has a schedule. €40bn of loans have to be off the balance sheets by 2019, though sales will be back-end loaded. Ten service companies have been licensed by the Bank of Greece.
Scarily one bank has just re-structured €2.2bn of loans , but in the same period had €2bn of re-defaults. Recovery units are said to be a bottleneck in Greek NPLs, and an education process is still required on the re-structuring side according to one observer.
In Portugal the recovery of real estate prices has closed the gap between book values and market prices for assets, so facilitating the sale of secured loans. As in most markets the easiest (and therefore earliest) sales of NPLs have been related to individuals (credit cards, consumer loans, overdrafts) with SME exposures coming into play next.
You can follow Hedge Fund Insight on Twitter (@HFInsightEditor). Details for the Capital Connection Forum can be found at www.ddc-financial.com/capital-connection-2017. Some presentations are available there. Hedge Fund Insight has recordings of some of the sessions – which can be requested through firstname.lastname@example.org
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