The European distressed market has been quiet this year. This is a function of ongoing government support, supportive sponsors and lenders, and a huge amount of liquidity in the market. Many companies which we and our clients identified as potential restructuring candidates have managed to complete successful refinancing transactions and have avoided the restructuring negotiation table.
As a result of this macroeconomic environment, despite the last 18 months resulting in the introduction of new restructuring frameworks not only in the UK, but across Europe, we are yet to see significant volumes of distressed situations that result in those frameworks being used.
In the absence of significant distressed opportunity, our clients, who are predominantly credit funds, are refocusing on a broader range of opportunistic investments. Where restructuring situations do arise, they often arise in relation to companies which don’t raise capital in the public markets, and so are less widely followed.
Often clients are looking to off-market/private and illiquid situations to source opportunity and put capital to work. This is the space that has kept us particularly busy this year, with a number of restructuring and special situations transactions that we have executed outside the glare of public of markets.
As we look towards next year, the question remains as to when the distressed market will return. Cracks are starting to appear – inflationary pressures, supply chain constraints, the ongoing threat of the pandemic recovery being derailed, as seen recently with the Omicron variant. Any of these factors could result in increased levels of distressed and restructuring activity.