Restructuring Opportunities in Some Sectors, a Wait for Most Others

With default rates and bankruptcy filings earnestly sticking near their all-time lows but loads of debt coming due very soon, finding distressed opportunities is a two-pronged game of waiting while still identifying sectors that need help now, three industry veterans said Wednesday.

“I think now is an extremely interesting point in the cycle,” said Brian E. Ramsay, a managing director at private equity firm Littlejohn & Co., speaking on a restructuring panel at the 2011 Dow Jones Private Equity Analyst Conference in Midtown Manhattan. Ramsay and his firm think it’s time to stop focusing on the fact that companies are defaulting at a rate of nearly zero and instead trying to find the companies and sectors that need to be fixed.

Ramsay likes companies involved in shale oil gas extracting technologies, with many experts predicting an imminent boom in that industry. Shale oil gas, he said, could be one of those sectors that’s in a bubble now but could be restructuring opportunities once that bubble bursts. Ramsay did caution, “I wouldn’t play with equity in it.”

Newton Glassman, a managing partner at Catalyst Capital Group Inc., said book-printing companies could be a big opportunity.

“People aren’t reading books,” Glassman said, admitting that he hasn’t bought a hardcover novel from a bookstore in two years, and that like a growing number of others, he does all his reading on his Kindle and iPad.

While those sectors could have multiple companies in need of restructuring, many of the future plays will take place after 2012, when debt maturities that have continually been pushed back will start to come due.

Laurence L. Gottlieb, who runs Fundamental Advisors LP, knows that better than anyone. His firm focuses on municipal bonds, where “that can has been kicked down the road” about as far as it can go.

For municipalities and other public entities, it’s a question of “When is the ‘come to Jesus’ moment?” Gottlieb said. He said that because regional lenders and state institutions are having enough problems of their own and can’t really help out the municipalities, firms like his become the source.

“We are their only liquidity and capital provider,” Gottlieb said. “We are the balance sheet.”

But like the rest of the economy, uncertainty reigns when it comes to make an overarching statement about restructuring cycles. All three panelists agreed that for the first time, it’s impossible to compare this restructuring environment with any other because in Ramsay’s words, things have died down “across the board.”

“This one was sudden, extreme and completely synchronized,” Ramsay said.