My last Reflections column in the Journal of Corporate Renewal was titled
“Corporate Restructuring: Will the
Force Awaken?” I’m here to tell you
now that it has and we’re in the
early stages of the new cycle.
I write this having just returned from
TMA’s biggest and best Distressed
Investing Conference ever. Over
700 of the top professionals in the
restructuring industry attended the
annual event in Las Vegas in February.
The quality of the educational panels
was excellent, and the two keynote
speakers were widely regarded as
the most outstanding we have had.
First up was Tom Petrie, CEO of Petrie
Partners and one of the foremost
experts on the oil industry in the
world. Petrie addressed the state of
the price of oil—where it’s been and
where he thinks it’s going, and why.
The summary is that Saudi Arabia
and Russia, the two largest low-cost
producers of oil in the world, will not
cut production to inflate the price
per barrel. To the contrary, the stated
intent to maintain production at
current levels is to drive high-cost
producers—namely, those in the U.S.
and Canada—out of the markets.
The Saudi cost of production is about
$20 per barrel, still well below the
current market price of world oil (in
the low $30 per barrel range as this is
written), while the costs of fracking,
deep water, and oil sands production
in the U.S. and Canada are multiples
Distressed Cycle Is Now!
BY J. SCOTT VICTOR, TMA GLOBAL CHAIRMAN
Distressed Market Perspective / History
Confidential – page 10
U.S. High Yield Default Rate (1987 – Present)
1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
U.S. HY Default Rate Average
Current Default Rate: 2.8%
As of January 31, 2016. Source: S&P for default rates from January 1987 to December 1989. Moody’s for default rates from January 1990 to December 1997. BAML for default rates
(par-weighted) after January 1998.