Could FT offers be rescinded due to COVID-19?
Given recent market anxieties, is there any reason to believe that FT offers might be rescinded? What’s the outlook for elite boutiques?
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LMAO FT Partners it is
The answer is obviously yes - there is a risk. Too early to tell in any direction with confidence.
As someone who has been in industry since last crisis (with peers who have also been in industry since last crisis) - this has potential to be more disruptive than financial crisis. People are acting irrationally - which leads to secondary and tertiary impacts. Sponsors telling portcos to draw down on all available lines of credit. Companies across all industries are likely to default. Cash is king and non-profitable companies are going to suffer.
Don’t want to be a doomsday prophet - but risks are clearly there for a massive reset. It’s part of being in industry and markets don’t always go up. Tough for younger people to understand as they’ve only known boom times.
Everyone hoping for a V recovery - but it’s going to get worse before it gets better.
You hit the nail on the head the part about not wanting to be a Doomsday Prophet. I was in High School during the Tech Bubble crash and worked through the GFC. Folks that haven't seen a crisis are easier to spook because they don't understand what's going on. This is going to be tough for everyone, but the folks will have a changed mentality. Hopefully it translates to teaching a younger generation about what happens when panics set in. I mean, I remember when the GFC happened, talking to folks with 20+ years of experience who worked through the littany of Financial Crisises we've seen ranging from Black Monday in '87 and the S&L Crisis of the late 80s to Mexico in '94, Asia in '97, and Russia in '98, and their mentality was often focused on staying flexible and being willing to adapt to a changing and unknown situation. That's all you can really do right now. Be flexible. Keep up with the situation. Adapt and move on.
Two words: Debt servicing. That's what's going to make this bad. How bad it gets depends on how long the economy stays at a standstill.
You are being just a bit alarmist, as is the media.
I work at one of the firms listed in the recent “xyz firm tell portcos to draw lines” articles, and the articles are, at worst, totally false. They are, at best, huge exaggerations.
In reality, portcos are being told there MAY BE added liquidity demands coming IN CERTAIN INDUSTRIES/SECTORS as revenues TEMPORARILY slow down, which MAY hinder their ability to pay certain expenses.
Portcos HAVE NOT BEEN DIRECTED TO DRAW THEIR LINES. Instead, they have been told to not worry about drawing their lines to meet cashflow demands over the next couple months. This contrasts with the normal protocol of: “tell us before you draw the lines, and there better be a damn good reason why you need to draw it.”
On the new investment front: we have explicitly been told to wave it in. We view this as very temporary & just a regular-way panic. Buy buy buy.
I'd agree to disagree as well. You may be right on the overreaction of telling portcos to draw on iines. I'm betting this is the beginning, and that many will lose jobs in the wake of this. Hospitality is suffering, and obviously consumer discretionary (eg gambling) is suffering. There are going to be millions of job losses, and I think we saw a pretty good uptick in unemployment claims today. We also saw pretty good weakness in the northeast manufacturing economy through Empire State and Philly Fed manufacturing indices. There will be spillover to other industries. People will become more scared of job prospects and will spend less. The big question is how long this virus is a serious issue and how long these "flatten the curve" movements persist. If it wasn't an issue tomorrow, I think we could get a fairly quick recovery, but the longer it plays out, the more clouds on the horizon.
Just my two cents.
Just lost my offer