Distressed debt activity rises 16% in 2018

The US and Asia are experiencing a wave of large distressed debt and restructuring deals.

Distressed debt deal activity is on the rise globally, with the US and Asia Pacific regions leading the trend, according to analysis from Refinitiv.

The analysis by Refinitiv, formerly the financial and risk business of Thomson Reuters, found that global distressed debt and bankruptcy restructuring activity reached $196.4 billion in the first nine months of 2018, up 15.9 percent on the same period last year.

The activity was spread across 158 transactions, down 32.7 percent on 2017 indicating that distressed deal sizes are growing. The energy and power industry led, accounting for 36 percent of the market, while industrials followed with 26 percent market share.

However, there is a large region split in activity. In the US, completed deal activity hit $119.8 billion during the first nine months of the year, up 55.7 percent over the same period of 2017. The Asia Pacific region, including Japan, saw deal value leap 554.4 percent to $48.5 billion, largely driven by the completion of debt restructuring by TK Holdings in April 2018.

But in EMEA, distressed debt activity has fallen, with activity totalling $50 billion, down 42.8 percent compared with the first nine months of 2017. Europe also saw a rapid fall in deal numbers, with just 53 transactions completed, a fall of 41.7 percent.

In the US, the industrial sector led the way in restructuring, accounting for 36 percent of all deals, closely followed by energy and power on 34 percent. In Europe, energy and power was dominant and accounted for 54 percent of deals while industrials was a distant second with 16 percent.

Each region has significant announced restructuring activity in the pipeline, worth $130 billion, $72.4 billion and $233.2 billion in the US, EMEA and Asia Pacific respectively.