Rx Slowdown? Outlook?
I work at a top Rx shop, and things have been pretty slow. My hours have been as low as 20 hours of actual work and maybe as high as 60-70 hours so far this year. I have probably worked 40-50 hours on average the last couple months. It's been really nice after grinding through 2020
I know others in my group are still working 80+ hours, and we have had some pitch work, so I understand that this might not be the case for some people
Wanted to see (1) how other people are doing and (2) what are people's thoughts on Rx for the rest of the year
Same here. Been doing more debt advisory / bespoke financing work to fill the void but capital availability has definitely pushed out regular way restructuring transactions. We were working on an A&E + new money sponsor investment and the bank group eventually came to terms without outside capital.
Last year+ has been a crazy time to be in restructuring. Have seen historic peaks in filings and distress and then now unparalleled capital availability. Honestly a welcome change for a 2nd year analyst but to the 1st years and incomings who may be antsy: don’t stress, there is 100% more cycles to come and likely a super cycle in the near future. All of the rescue capital that came in to bail out companies post covid haven’t fixed the problem, just kicked the can out longer. Embrace the unconventional liability management work that you’ll see until then bc that’s equally constructive to your experience / future career in PE or banking.
Worst time to be in RX right now by far. At a good Rx group (HL/Gugg/Mill) and been doing nothing
so not HL
OP here. Hoping to turn this into a more meaningful discussion so bear with me.
Fed-backed asset purchases, increased access to capital markets, etc. are keeping bond prices afloat, and investors are turning to riskier assets / yield. A Reorg survey from earlier in the year highlighted a relative shift in pricing - 90's becoming the new 80's for bonds. There's a lot of noise to look through. I think as we approach a near level of pre-Covid recovery, those businesses that have weaker business fundamentals (whether that be from Covid-driven acceleration / adoption or the business was underperforming prior to the pandemic - physical retail, legacy technology and media, etc.) will begin to show signs of underperformance relative to its peers and to economic recovery. There could be a normalization of bond prices or price discovery from the realization of underlying business deterioration and/or a shift in investor appetite and risk aversion. I think it'll be interesting to see how many Rx's will resurface from those that have already reorganized but cannot meet performance hurdles, newly negotiated debt indentures and credit agreements, etc.
Many believe there will be an uptick in activity in 2H21. What do people think about the above rationale? What do people think will be likely catalysts for an uptick in activity (Covid, rolloff of government aid to households and businesses, unexpected rise in inflation, etc.)? What are some industries that are still very much vulnerable and why?