The Examiners: Anders J. Maxwell on the Outlook for Corporate Restru...

Interest rates that remain near zero and debt maturities that have been pushed out to 2017 and 2018 have helped drive Chapter 11 filings to historic lows. Has this difficult environment put corporate restructuring on life support?

Corporate restructuring is counter-cyclical. Activity peaks when liquidity—the sheer availability of credit—-is tightening and market sentiment is turning negative. In the current circumstances, with the economy flush with liquidity and sentiment rosy, corporate restructuring activity is clearly in a cyclical trough. But make no mistake, the burgeoning number of badly managed, poorly positioned, and over-leveraged businesses today are the ones on “life support.”

The Federal Reserve’s controversial policy of “Quantitative Easing” is providing the credit to prop up not just failed businesses, but key segments—housing, mortgage finance and banking—of the economy and the federal government. This brings to mind one more time-honored adage, “You reap what you sow.” The business cycle will inevitably repeat itself. Further prolonging the market’s current state of denial will only propel restructuring to another, likely higher, peak.

Anders J. Maxwell is a managing director in the restructuring & recapitalization group at New York-based investment banking advisory firm Peter J. Solomon Co.