2022 TRENDS
Here are a few trends we saw from our client work during 2022, which reveal increasing levels of distress with investors becoming more astute and willing to make use of their legal rights after years of "amend and extend".
We saw an increase in distress in technology where asset values of all companies from start up to unicorn to more mature fell, with investor appetite for risk and further investment reducing.
Tech Distress
Crypto-currencies
The crypto-currency bubble appeared to burst, with a number of exchanges entering insolvency and raising complex questions relating to client assets, tracing and avoidable preferences.
Fraud
We saw more public allegations of misconduct and fraud relating to the running of failed business, some related to the crypto space but also in finance.
Contingency Planning
With pressures on businesses growing, consent comment and predictions of recession more and more directors have sought advice to understand their options and manage liabilities.
Rise in Enforcement
After the COVID-19 years of “amend and extend”, we saw lenders flex their rights, including use of strategic administrations and receiverships.
Outlook for 2023
Funds, hedge funds and private equity are finding fundraising more difficult and more restriction are imposed by investors, making the delta between the headline value of an investment fund and what it can deploy in particular situations much greater. As we enter 2023, we believe some areas of potential development and interest could include:
CONSUMER
BUSINESSES
Impact of COVID-19, supply issues, rise in energy prices and impact of Ukraine war continues to take its toll, with inflation and poor consumer demand worsening the outlook for retail and other consumer facing businesses.
PE CAPACITY
As more and more portfolio companies enter the stressed and distress space, PE houses are likely to be more selective with financial and human capital, and may turn off the taps off for some investments.
Sovereign Debt
Growing numbers of sovereigns are either close to defaulting on bond payments or have already done so. Those dependent on tourism, recovering from the pandemic and energy crisis are most at risk.
Amend & Extend
With interest rates rising and asset values falling, amend and extend is unlikely to be an option. With investors demanding proper returns, restructurings are more and more likely while these same pressures will mean liquidation for hopeless cases.
rESOURCES
2022 was full of legal developments, which prompted us to launch the BRIG blog with shorter thought pieces and more interactive content. We continue to produce client alerts and publish articles in the industry press. Here are a few recent highlights of our content:
Interactive guide to Sovereign Debt Restructurings
Supreme Court rules on Director’s Duties to Creditors
Crypto Exchange Bankruptcies & Avoidable Preferences (US law)
Unexpected Trading Dynamics
in Sovereign Guaranteed Debt
High Court guidance on Appropriation
GROWTH
MoFo London and the firm globally continues to grow, adding new lawyers and practice areas to better serve our clients. Recent hires who add to our BRIG and related capabilities include:
Sam Riley
enhances the firm’s financial services and FinTech offering in London. Joining from the Bank of England, she has integral insights into the ever-evolving nature of FinTech, cryptocurrency, and digital asset markets and regulatory landscape.
Marie-Claire Strawbridge
joined the firm’s Antitrust Law/Competition and National Security practices in London. As the UK’s new National Security and Investment Act 2021 begins to have an impact on transactions, including restructurings, her direct experience will be invaluable.
Seth Kleinman
joined the US BRIG team, further strengthening MoFo’s creditor representation capabilities. Seth has exceptionally strong experience working with par and distressed investors, CLOs, and high-yield funds, both in and out of chapter 11.
