Increase in restructuring deals expected

Morgan Stanley predicts global slowdown will force Middle East companies to address debt

Dubai (Zawya Dow Jones) Morgan Stanley expects an increase in restructuring deals in the Middle East in 2012 as the global economic slowdown forces more companies to address debt problems or revisit previously-arranged deals.

Yet despite those woes, r e g i o n a l f i xe d - i n c o me sales should also improve this year as healthier companies tap strong investor demand for their debt amid a continued pullback on lending by banks, executives at the investment bank told a media roundtable in Dubai on the business outlook for 2012.

“I expect that there will be a rebound in restructurings.” said Peter Fort, head of mergers and acquisitions for the Middle East and North Africa at Morgan Stanley.

“The steep recovery of 2009 resulted in some of the situations which may- be would have been on the brink of default to start to look a lot better. However, at the same time, some of the underlying issues have not been resolved.”

Squeezed by a dearth of new financing in the wake of the global crisis, many companies across the Middle East restructured debt over the past three years, negotiating with banks to extend maturities and avoid default.

With persistent stress in asset markets globally, however, some of those deals may need to be revisited, Fort said.

“Some of the restructurings that closed in 2009 and 2010 may have to be renegotiated,” he said.

“Over the next few years you could see ‘re-restructurings’ in cases where it is not possible for the entity to pay back the debt through asset sales as anticipated.”