A quick exit from bankruptcy court may be the surest way back in for distressed companies, according to restructuring professionals at the 31st Annual Bankruptcy & Restructuring Conference of the Association of Insolvency & Restructuring Advisors, Bloomberg News reported yesterday. The professionals cited an increase in hedge funds and other alternative investors in the distressed-investing business for shortening the average length of time companies spend in court to less than a year in 2014. That compares with an average of nearly two years a decade ago, they said. “You saw some of the fast Chapter 11s coming out of bankruptcy with relatively high leverage recently, and some of them had to go back in again,” said Ronen Bojmel, head of restructuring at Guggenheim Securities LLC. The most significant driver of quick bankruptcy exits may be the move to alternative distressed investors due to an exit from the business by traditional banks because of regulatory tightening to curtail risk-taking, said panelists. They suggested that, because of the change in lenders, less operational restructuring work to make a company’s business more feasible in a long term is getting done in chapter 11. “They are not necessarily long-term investors,” Alan Holtz, managing director at AlixPartner’s turnaround and restructuring services group, said at the conference. “They want to move fast, clean up the balance sheet and move on.”
