Industry experts said that the current recession will last at least 3 years and possibly longer absent a revival in credit markets. Mr Michael Psaros managing partner at KPS Capital Partners said that "This is going to be a 3 to 4 year disaster. US is going through a Great Recession, which will provide investors in distressed assets with unprecedented opportunities. We are going to invest an awful lot of money this year. There is an inexhaustible supply of bad management out there."
He said that KPS Capital, which manages special situations funds and private equity funds with capital exceeding USD 1.8 billion, largely sat on the sidelines last year. The firm is ramping up its investments this year. He added that "We are just very excited about this year and next."
Mr Holly Etlin MD at AlixPartners said that financial distress will last 3 to 5 years due to a lack of liquidity in credit markets and lack of debtor in possession financing, or DIP loans, used by bankrupt companies to reorganize operations. He added that "Stuff has got to start moving off the bank balance sheets. I talk to colleagues and friends who are just sitting on their money. Until banks start clearing off their balance sheets, they are not going to be in a position to lend."
Mr Etlin reported seeing very little bankruptcy financing and asked the audience of 180 participants if anyone in the room was doing any DIP loans. No one in the room rose their hand. He added that "That is not viable. We see continued distress for 3 to 5 years."
Meanwhile, Mr Jonathan Pertchik chief restructuring officer at WCI Communities also said that the ethanol industry as a burgeoning sector may provide some opportunities.