Regional Bank Woes Aren’t Over
The Brink Live, a conference hosted by Bloomberg this week
In the last issue of Bloomberg Newsletter The Brink, Erin Hudson, gives to the subscriber a quick update on the perspective of US Regional Banks following up a discussion had with some experts on distressed debt.
Fallout from the regional banking crisis is far from over in the eyes of distressed debt specialists who spoke at The Brink Live, a conference hosted by Bloomberg this week.
Panelists said investment opportunities exist in the capital structures of the troubled banks themselves as well as the companies and industries that are were some of those banks’ biggest borrowers.
“Credit is not flowing anymore out of those banks,” said Randy Raisman, managing director at Marathon Asset Management, during one of the panels. “This is the thing that’s going to tip us over into that real economic slowdown, and it’s going to be painful but it’s also going to create a lot of opportunity.”
King Street Capital Management’s Paul Goldschmid believes banks’ liquidity crises are near the end for now, but expects the market to keep putting regional bank balance sheets “under the microscope,” he said. Particular attention will be paid to commercial real estate, consumer, small and medium-sized business loans.
Investors and advisers should also keep an eye on how a lack of brand loyalty is wreaking havoc on consumer products, the disruption that electric vehicles are causing in the auto industry and potential fallout from private equity firms combining many smaller companies in a given industry, like dental practices, according to Holly Etlin of AlixPartners. Other sectors facing ongoing pressures include healthcare services, bricks-and-mortar retailers and commercial real estate.
On the property market, the question that’s haunting investors angling to jump into direct lending to beleaguered landlords is whether the timing is right — or if there’s still further to fall.
“Distress is an interesting place to invest because you’re always thinking ‘are things going to get worse, or are there going to be better opportunities a year from now or two years from now?’” Goldschmid said.
Several speakers said they believe creditor-on-creditor brawls sparked by borrowers pushing some lenders back in the repayment line or shifting assets out of their reach will continue to be a prominent part of corporate distress. The moves anger creditors but allow companies to raise new cash in times of crisis.
“Providing that capital is one of the most interesting things we’re seeing in distress right now,” Goldschmid said. “We’re spending a lot of time with sponsors talking about those types of deals.”
Link to The Brink :
https://www.bloomberg.com/account/newsletters/the-brink
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