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Bets on Distressed-Debt Spike in Nordics Spark Hiring Spree

Bets on Distressed-Debt Spike in Nordics Spark Hiring Spree

U.S. advisory firm Alvarez & Marsal is expanding its restructuring unit in the Nordic region ahead of an expected spike in volumes once emergency support measures are phased out.

By November, the firm will have hired three restructuring experts from Ernst & Young LLP in Stockholm. One of them, Jonas Rickardsson, says the “aim is to be around 15 people relatively soon, spread across the Nordics.”

“I think we have a stronger offering at Alvarez & Marsal than, for example, a ‘Big 4’ firm, as we aren’t tied up by audit restrictions,” said Rickardsson, a managing director in the U.S. company’s financial restructuring practice.

Bets on Distressed-Debt Spike in Nordics Spark Hiring Spree

The Nordic region has become a hive of activity for advisory firms focusing on distressed debt, with “several international restructuring firms and independent advisers setting up offices and expanding activities,” according to credit analysts at Danske Bank.

Rickardsson says he expects companies to face increased difficulties when governments eventually wind down their corporate support programs. “Sectors such as travel, hotel, retail and entertainment industries and certain construction and real estate sub-sectors are amongst the hardest hit to date,” he said.

The second quarter of 2021 will be crucial for many companies that will have been off support programs for 3 to 6 months. They will have done much of the short term cost savings but will potentially still not see revenues return to the needed levels. This will drive a spike in debt, which needs to be restructured, as well as a more invasive operational restructuring of the business.

--Sean Cory, a partner at consultancy Oliver Wyman

Finland is a case in point. Unless there’s a significant improvement in the outlook there, many firms could start running into trouble next spring as state programs that provided a lifeline are set to expire, according to Juho Kostiainen, an economist at Nordea Bank Abp.

It’s a similar concern in Europe’s biggest economy, where Germany is also bracing for a possible jump in insolvencies as pandemic aid is brought to an end.

“A number of other sectors are yet to experience the full effect of Covid,” Rickardsson said.

Credit Malaise

Taus Wolfsberg, a managing director in Alvarez & Marsal’s transaction advisory group, says the Nordic region’s credit market will play an increasingly important role.

“A number of bonds are expiring in 2020 and 2021, and for some of these companies there will be no easy solution for refinancing and that will also lead to situations where restructuring is needed,” Wolfsberg said.

Compounding the gloomy outlook is the continued growth of the region’s junk bond market, particularly in Sweden, where higher yielding real-estate bonds have been a big driver of issuance in recent years.

“As multi-layered capital structures including also public debt such as high-yield bonds have become more common, we see an increased complexity in restructuring situations,” Rickardsson said.

“We think that activity will be high over the coming years,” he said.

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