Sage Advice from Some Distressed Investment Pro's

Day #2 of the TMA Distressed Investment Conference was as worthwhile as the first day. Lots of good data points, topped off by some sage advice from some distressed investment pro's. I will get to that advice after a brief overview of some of the other high points.

Today, there were two excellent presentations, one on "Where Will the Opportunities Be", the other on "Trends in DIP Financing." As to the former, my own take has been that opportunities will be available in every single industry, and in every size company. Investors should focus on what they know best so they are able to make the most of the opportunities that will abound. The panel’s comments deepened my hypothesis that the opportunities will be everywhere.

As to “Trends in DIP Financing," notwithstanding glimmers of hope from the panelists, for all intents, I see the DIP market as being largely non-existent, at this time. I have trouble envisioning any financial institution committing sizable dollars to this market given the pressure on the institutions to deleverage and to reduce their risk exposure. The best source of DIP financing will likely be existing creditors. But, capital markets can change quickly and this is a niche market every turnaround professional will want to watch very closely.

The highlight of Day #2, for me, was a terrific panel of seasoned pro's in distressed investing. Their insights on what experienced capital was doing at this time made the entire Conference worthwhile to me. My perception has been that those who had recently raised capital to invest in distressed were largely sitting on the sidelines. Two of the panelists, Michael Heisley of The Heico Companies and David Shapiro of KPS Capital Partners, were especially illuminating as to at least the attitude of some of the experienced distressed money. They both articulated a host of reasons why there organizations are currently taking a very cautious approach to new equity investments in that they see the downturn as (1) long lasting (as in 4-5 years), and (2) not yet at close to the bottom.

All manner of financial entities need to keep their visibility up and thier pipeline of potential deals flowing. The challenge in the current environment is to ferret out those entities who are really doing deals at this time, as opposed to those who are just trying to keep visibility for a future time. Woe be to the Restructuring team that wastes much of their precious time dealing with an organization that is more interested in maintaining their image of doing deals rather than really doing deals at this time.

Up next: Takeaways from the Conference.