Just when the world of restructuring was becoming dull, the world responded with a wave of financial distress. That sounds like bad news for most people, but for the cognoscenti of financial misfortune, it’s like an early Mardi Gras.
Starting in Greece, there is a story that, if not quite Mycenaean, is at least getting old. The country, you see, will probably need another bailout. Greece has already negotiated two bailouts worth 240 billion euros, or about $310 billion, with the European Commission, the European Central Bank and the International Monetary Fund, but the country now agrees that its banks need at least $6 billion to $7 billion. Everyone else says the number is closer to $20 billion. That sounds like small potatoes to those steeped in United States financial institutions, but remember that the Greek banking sector is probably close to the size of New Jersey’s. A third bailout cannot be too far behind.
Next stop, Ukraine, where the jubilation over getting a “do over†on closer relations with Western Europe is largely masking the dwindling foreign reserves in its banking sector. Ukraine said on Thursday that it would seek $15 billion worth of aid from the I.M.F. Christine Lagarde, the managing director of the I.M.F., said that she would send a mission to Kiev in the coming days for preliminary talks. There is a good chance that the United States â€" perhaps with friends â€" is going to get back into the bailout business, at least until the I.M.F. can take over. I suspect the Tea Party types will love that.
On the other side of the Atlantic, Repsol has agreed to take about $5 billion in Argentine debt to make up for the government’s decision to snatch Repsol’s local subsidiary. It will be interesting to see how precisely that is going to work because you can bet that Elliott Management is going to be lurking about to make sure that any payment on that debt heads its way first. Argentina has asked the Supreme Court for help on that one.
For Repsol, the government has promised that it will realize at least $5 billion on the debt, which will actually have a face value somewhat higher, so wouldn’t it be interesting if Elliott decided to buy the debt from Repsol? Maybe for something less than $5 billion, assuming there are no transfer restrictions, of course. Then Argentina would get to pay off Repsol and deal with Elliott, too. What fun!
And closer to home, we may finally have a big Chapter 11 case filed in 2014. But it probably won’t happen until March, or maybe April, at the earliest.
The on again off again bankruptcy of the company formerly known as TXU appears to be on again. Energy Future Holdings, brought into the world as part of one of the most ill-conceived leveraged buyouts ever, is likely to be broken up. Most interesting, after rumors of a prepackaged deal, and then a pre-negotiated one, and then something about a so-called 363 sale of assets, it looks as if Energy Future is just going to file an old-fashioned Chapter 11 case and negotiate a plan with its creditors.
The case would be a wild affair, given the huge amounts of debt and complex tax issues at stake. The bankruptcy attorneys can barely contain their excitement.
Stephen J. Lubben is the Harvey Washington Wiley Chair in corporate governance and business ethics at Seton Hall Law School and an expert on bankruptcy.
