Takeaways from TMA's Distressed Investing Conference in Vegas

This two day conference was rich with takeaways for me. Some of the takeaways were confirmation of some hypothesis with which I have been working. Some generated new thoughts.

Here are my prime takeaways (some of which will be the subject of deeper commentary in the coming weeks):

1) We are in for a protracted downturn, one measured in years not months,

2) There is presently a dearth of capital for distressed situations, notwithstanding some sources talking up their interest,

3) Because of #2, for the foreseeable future “hostage financing” will be the best source of capital, notwithstanding the desire of these capital sources to exit,

4) Because of the complex capital structures that have evolved because of syndicating and parsing the risk levels, tranche warfare will be the name of the game in many situations,

5) Valuations will play an important role in the tranche warfare, at a time when valuations are more difficult than any time in my memory,

6) Companies without compelling business models and/or market leadership positions will often be quickly liquidated (as in gone forever, not just sold in a 363 sale),

7) There is much more focus on expense reduction rather taking revenue from competitors (some smart consulting firm is going to start going after this opportunity),

8) Constituencies are not going to stand by and watch professionals run up big fees where constituencies are getting creamed, and

9) Many in the profession are looking for a redo of past patterns, some others are recognizing that the changed circumstances call for new methods and processes of restructuring.

My overarching observation is that all the change represents great opportunities for firms…whether law firms, turnaround firms, or investment banking firms…that are willing to truly embrace the changes that are occurring. I am expecting that we will see some new market leaders emerge over the next couple of years.