Restructurings to continue...

City A.M. Reporter
THE push to cut debts will drive a high number of corporate restructurings in the next year, as banks grow more willing to take writedowns and as businesses run out of cash, a senior restructuring adviser said.<br /><br />Simon Davies of Blackstone Group yesterday told the Reuters Restructuring Summit that the paralysis in restructuring brought on by last year&rsquo;s financial shocks is now starting to ease.<br /><br />&ldquo;The businesses that are properly being restructured are the ones that are physically running out of money. Others are being tinkered with,&rdquo; Davies said.<br /><br />Greek telecom company Wind Hellas was forced into restructuring talks last month after running out of cash to cover a &euro;67m (&pound;61.8m) 15 October interest payment.<br /><br />Davies, a managing director in the US private equity firm&rsquo;s European corporate advisory unit, said banks&rsquo; weak balance sheets gave them strong incentives not to recognise all their losses, as doing so might cause another financial crisis. &ldquo;Leverage is something that is in the system that we try to <br />gradually reduce so that everything does not go bust,&rdquo; he said.<br /><br />Boosted by cheap central bank funding, banks are seeking to grow back into profitability and use the cash generated to absorb losses, leading to a smoothing out of writedowns.<br /><br />&ldquo;We eased into the crisis and we are likely to ease out it,&rdquo; Davies said.<br /><br />As an alternative to persuading lenders to take a loss, companies have tapped the equity market to fix their balance sheets. A flurry of cash calls on the London market last week shows British firms have been able to ride a recent stock market rally to boost their capital.