Is it a good moment to make a move into Distress, Special situations and NPLs?
I'm based in Europe (London) and since 2020 Distressed investors have waited for their moment to shine but both fiscal and monetary policy seem to have denied them that. Also both economy and labour market have been more resilient than expected in a higher interest rate environment. Within this context would be a good move to transition into a buyside firm that is active in that space ? How have Distressed/Secial situations/NPLs investors performed over the years ?
Many thanks 🙏
The way I see it is, with the rise of leveraged lending to PE firms becoming ever more common and with all these PortCos being slapped with insane amounts of leverage (looking at you Clearlake) there is bound to be more defaults, just given companies are now more levered than before.
Economy is resilient but expect in ‘24 for companies to really start feeling the pain as the post-covid cash windfall everyone had starts to dwindle. Consumer discretionary spending is bound to drop over the next 1-2 years if we see another hike(s) and these rates will probably hold.
Additionally, we had a ton of ReFi’s in ‘21 so we won’t start seeing those maturity walls hit til ‘24-‘26, which has definitely delayed the cycle we were suppose to have.
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