President Trump will have the UK “over a barrel” on a trade deal, interest rates may end up at two percent and £36bn has been repaid to Lehman Brothers’ creditors. These and other economic insights emerged at Credit Strategy’s inaugural TRI Conference: Special Situations & Turnaround.
Held the same day as the TRI Awards, the TRI Conference brought together corporate restructuring and business turnaround specialists with economists, private equity funds, M&A advisors and corporates seeking funding.
Specialists in rescuing struggling businesses, the mixed group of funders and practitioners debated the economic climate as well as case studies of how they turned businesses on the brink of collapse into profit-making success stories. Here’s what delegates learned:
1 Trump has the UK “over a barrel”
To kick off the conference, Trevor Williams, former chief economist at Lloyds Banking Group and managing director at TW Consultancy, provided a sobering update of the economic climate.
Delegates heard and debated how the loss of cheap credit through the withdrawal of quantitative easing, plus “over exuberance in the corporate lending world”, could lead to a new wave of corporate failures.
Williams also predicted that base rate may end up at two percent in the UK and when asked if Donald Trump may have the UK “over a barrel”, when it comes to trade deal talks, he said: “Yes. We are stuffed.”
2 “Always be ready to sell the business”
This was the message from Jamie Constable, chief executive at R Capital, which invests in distressed businesses at the TRI Conference. His point was that whenever turnaround companies are rescuing beleaguered companies, practitioners should always be ready to sell the firm “because you never know when a buyer might turn up.”
Describing how R Capital turned around the Tie Rack and Rolling Luggage companies, he said the key to the whole deal was carving out the successful Rolling Luggage business from the struggling Tie Rack business.
Another pivotal moment was convincing the operators of Heathrow Airport - where Rolling Luggage rented a store that made £1m a year - that the company was a good tenant and should retain its lease.
3 Just the £36bn recovered for creditors
The Lehman Brothers liquidation is so colossal in scale, it has effectively pumped nearly £40bn back into the economy in the past nine years.
This was the impression from a keynote delivered by Tony Lomas, chairman of UK business recovery services at PwC, who has led the liquidation of Lehman Brothers – the largest corporate insolvency in history – since 2008.
A whopping £36bn has been paid out to creditors, and there’s now an £8bn surplus in recoveries. The £8bn is now at the centre of a legal case. Companies have bought this debt and are disputing what proportion each should receive. All creditors though, have received every penny owed.
4 US/UK insolvency regimes are converging
This was pointed out by William A Brandt Jr, a US-based turnaround specialist who founded the company Development Specialists.
Having worked in the UK, he has witnessed a convergence of corporate insolvency regimes in the UK and US. He also pointed out that the dollar will remain the world’s dominant currency; 10trn of debt held outside the US is denominated in US dollars.
5 “Bricks-only retailers are not long for this world”
In a presentation on how he and his team orchestrated the turnaround of German retailer Versandhaus Walz, Gavin George, chief executive of turnaround firm Alteri Partners, emphasised that “Amazon has raised the game”.
He also stressed the importance for retailers in managing effectively the journey of customers, as they flit between offline and online through to transaction.