The Business Times
business-time-50
INSIGHTS FROM CFA SOCIETY SINGAPORE

Distress investing: Debt could magnify risks of market dislocations

In considering distressed opportunities, investors will need to discern whether companies are permanently impaired or can be turned around

google-preferred-sourceAdd BT as a preferred source
    • Unprecedented monetary stimulus in the aftermath of the global financial crisis and during the pandemic should provide fertile ground for distress investing. Excess capital is often misallocated and leads to wasteful and ill-advised investments.
    • Unprecedented monetary stimulus in the aftermath of the global financial crisis and during the pandemic should provide fertile ground for distress investing. Excess capital is often misallocated and leads to wasteful and ill-advised investments. PHOTO: REUTERS

    Sebastien Canderle

    Published Tue, May 30, 2023 · 04:13 PM

    WITH recession expected in many economies, distressed situations will be an important source of deals for prospective investors. What will matter is whether the targets are permanently impaired or can be turned around.

    Two real-life scenarios from the debt bubble of the early aughts and the ensuing credit crunch provide helpful guidance.

    Cyclical volatility or dislocation

    UK investment firm Candover bought hygienic products producer Ontex for one billion euros (S$1.4 billion), or 8.1 times earnings before interest, taxes, depreciation and amortisation (Ebitda), in 2002. The debt package, comprising senior and mezzanine loans, totalled six times earnings.

    CFA Singapore InsightsPrivate equity

    TRENDING NOW

    Handled passively, satellite connectivity becomes a service that the telco distributes, while somebody else sets the economics.

    When every phone becomes a satellite phone, what happens to Asia’s telcos?

    The company says the disputes do not cast significant doubt on its ability to continue as a going concern.

    Koh Brothers Eco Engineering faces up to S$57.6 million in potential legal liabilities

    Under the Philippines’ new policy, up to four EV models will be provided with as much as 15 billion pesos each in fiscal support, in the form of tax payment certificates.

    Too little, too late? Manila’s billion-dollar bid to ignite its sputtering EV industry

    The planned DayOne data centre is expected to be the city-state’s first to feature on-site solid oxide fuel cell power generation.

    DayOne secures S$530 million green loan from DBS, OCBC and UOB for Singapore data centre

    Latest T-bills Treasury Bills Results & Interest NewsLatest SSB Singapore Savings Bonds NewsLatest COE Certificate of Entitlement News
    Latest Johor-Singapore SEZ NewsLatest BTO Build To Order & Sales of Balance NewsLatest STI Straits Times Index NewsLatest SGX Dividends, Share Price NewsLatest Bonds Market NewsLatest Singapore Stocks To Buy NewsLatest Singapore Economy News
    View More