Leveraged Finance in Switzerland Through the Downturn Are you ready for the challenge?

Transcription

1 Leveraged Finance in Switzerland Through the Downturn Are you ready for the challenge? Introduction: Dr. Søren Bjønness Widder Hotel, Zurich

2 Past: Climbing to new heights Slide 2

3 Past: Climbing to new heights Swiss annual aggregates of GDP (real) % % % % 360 0% GDP real Percentage change to previous year 12x 10x 8x 6x 4x 2x 0x European average annual LBO purchase price multiples 2 7.1x 7.0x 6.8x 7.6x 8.3x 8.8x 9.7x Debt/EBITDA Equity/EBITDA Other/EBITDA 140B European annual senior loan volume in leveraged transactions x European average annual LBO debt multiples 4 6x 100B 240 5x 60B 160 4x 3x 20B 80 2x 1x Q 2Q 3Q 4Q Deal Count 0 0x First Lien/EBITDA Second Lien/EBITDA Other Debt/EBITDA Source: 1 Federal Statistical Office (BFS); 2, 3 & 4 PwC European Leveraged Finance Market Update Slide 3

4 Present: Struck by fire Slide 4

5 Present: Struck by fire Swiss annual aggregates of GDP (real) GDP real Percentage change to previous year 4% 3% 2% 1% 0% 12x 10x 8x 6x 4x 2x 0x European average annual LBO purchase price multiples 2 7.1x 7.0x 6.8x 7.6x 8.3x 8.8x 9.7x 9.7x Debt/EBITDA Equity/EBITDA Other/EBITDA 140B European annual senior loan volume in leveraged transactions 3 European average annual LBO debt multiples x 100B 60B 20B x 5x 4x 3x 2x 1x Q 2Q 3Q 4Q Deal Count 0 0x First Lien/EBITDA Second Lien/EBITDA Other Debt/EBITDA Source: State Secretariat for Economic Affairs SECO; 2, 3 & 4 PwC European Leveraged Finance Market Update Slide 5

6 Future: Choppy waters ahead Slide 6

7 Future: Choppy waters ahead Number of financial covenant amendment requests in Europe Number of defaults vs. restructurings in Europe Q 2Q 3Q 4Q Defaults Restructurings There has been a sharp increase in the number of companies approaching lenders to waive or amend covenants (note that the publicly available data included in the charts only represents a fraction of the total market). The number of corporations restructuring debt has also soared since September &2 Source: PwC Debt Market Update. The charts include only publicly available data. Slide 7

8 Future: Choppy waters ahead credit spreads defaults covenants growth funds raised asset prices consumption business model margins loan volume multiples turnover Slide 8

9 Future: Choppy waters ahead Sources of value increase, in % 32% 25% 51% 31% 46% 39% Leverage Multiple Arbitrage Operational Improvement 18% 22% Leverage (1980s) Multiple Expansion (1990s) 36% Earnings Growth (2000s) Operational improvement (2010s) t The origins of value enhancement are increasingly found in operational improvements. The significance of leverage is decreasing. Private equity companies are increasingly capitalising on the opportunities that arise by using experienced management teams to implement specific operative improvements. Source: BCG / IESE Business School estimates, Goldman Sachs Slide 9

10 Measures: Be prepared! Slide 10

11 Measures: Be prepared! opportunity management cost management scenario planning cash is king Slide 11

12 Programme Macroeconomic Perspective Prof. Dr. Jan-Egbert Sturm Professor of Applied Macroeconomics, Director of KOF Swiss Economic Institute, ETH Zurich Current State of the Leveraged Finance Market in Switzerland Gerald Leb Executive Director, Head Syndication UBS AG, Global Wealth Management & Business Banking Managing Through the Downturn Markus Koch Partner Advisory, Business Restructuring Services, Zurich Panel discussion with Q&A session Host: Dr. Søren Bjønness Participants: Prof. Dr. Jan-Egbert Sturm, Gerald Leb, Markus Koch Slide 12

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