- Dealmakers expect interest rate hikes to spur restructuring
- Federal Reserve has been delaying raising interest rates
Greenhill & Co. Chief Executive Officer Scott Bok said he expects interest rate increases to fuel restructuring work as financing becomes more expensive for troubled companies.
“I sometimes joke that it’s almost impossible to go bankrupt in America today because somebody will lend you more money. I think that will change,” Bok said Monday during a conference in New York. “If and when the Fed raises rates, which I suspect some day will happen, I think the restructuring business could get extremely active again.”
Greenhill and rivals such as Moelis & Co. have been counting on more restructuring work to supplement their merger-advisory businesses. Both firms have dropped at least 20 percent this year in New York trading, and the central bank last week opted to keep interest rates near zero. Still, Federal Reserve Chair Janet Yellen said most policy makers still expect to raise rates this year.
“Everybody knows that it’s been an incredibly accommodating credit market and, as a result, it’s been a fairly slow restructuring environment,” Bok said. “It’s certainly starting to change, at least in the energy sector.”
Investment banks including Evercore Partners Inc. have hired to prepare for an increase in the amount of companies that may need to go bankrupt, sell assets or find a buyer. Houlihan Lokey Inc., which is known for work on the world’s largest bankruptcies, had an initial public offering this year to fuel its growth.
PJT Partners Inc., the firm founded by Paul J. Taubman, has announced a deal to combine with Blackstone Group LP’s advisory businesses. The Blackstone restructuring operation, led by Tim Coleman, has also been eyeing energy companies as possible clients.
Evercore said in February that the energy business was “as busy or busier than ever” due to weak oil prices. It has added ex-Deutsche Bank AG energy banker David Andrews and Monday announced the hiring of Daniel Aronson, previously at Lazard Ltd., for restructuring.
Greenhill advanced 1.3 percent to $31.81 at 11:02 a.m. in New York, narrowing its decline for the year to 27 percent.