Bankruptcy Expert Talks Conditions and Distressed Investing
Edward I. Altman lectures at University of Toronto Faculty of Law
BY Jennifer Hughey | March 9, 2010
During a free public lecture and panel discussion at the UofT Faculty of Law campus, internationally renowned bankruptcy expert and scholar, Edward Altman, said there is a fine line between highly distressed and default. He commented that we are not in an ‘average’ situation in the credit market and that everyone is ultimately fighting inflation.
Altman touched on major reasons the credit markets melted down in 2007-2009, what has happened since the recovery began in March 2009 and an outlook for defaults and recoveries in 2010-2015. The forecast was based on five different methodologies including his own mortality rates, recession scenario based methods and market based models. He talked about a new trend of increased popularity of distressed exchange tenders and the performance correlation between distressed securities and other asset classes.
Altman brought some heavy numbers to the table. He estimated the size of distressed debt in the US to be close to $1 trillion dollars and stunned the audience when he revealed how he thinks the real number of citizens who are unemployed in the country to be closer to 18%. “While we are in much better shape than we were a year ago,” Altman warned, “there is still tremendous risk of deterioration. The consumer is still weak.”
Along with Altman, a panel of experts discussed emerging markets, inflation, consumption levels and moral hazard concerning the numerous bail outs. Panelists included Judge James Peck from the US Bankruptcy Court, known for overseeing the bankruptcy case of Lehman Brothers; Mahesh Uttamchandani from the World Bank; Ken Coleman from the New York firm Allan Overy; and Dan Dowdall from Toronto’s Fraser Milner Casgrain LLP. Chairing the panel was former Ontario Superior Court of Justice, the Honourable James Farley, Q.C., who is now with McCarthy Tetrault LLP.
To view the webcast from the event, visit the Faculty of Law Information Commons
Download the PDF of Professor Altman’s Presentation.