Restructurers roll boulders uphill
Attempting to restructure a complex securitization can be a Sisyphean task. Many experts are reaching the conclusion that it might be simpler to push these deals into insolvency instead. Louise Bowman investigates.
IF IT AIN’T broke – don’t fix it. But when it is obviously broke, surely you should try to fix it? When looking across the wasteland of the once-thriving structured finance market you could be forgiven for wondering where to start. The potential to salvage any value through a restructuring varies widely from asset class to asset class and as the bankers and lawyers pick through the rubble there is a growing sense that the odds are against them.
Some judicious tweaking at the structures of the various master trusts has meant that much consumer ABS and prime RMBS has avoided imminent failure. ABS CDOs were such early casualties of this downturn that many have already been liquidated. It is the more esoteric products – CMBS and CLOs – that are now causing the most concern and are therefore the most likely candidates for any restructuring efforts.