The bank is expecting to deliver services like planning and financing advice to help firms in danger of becoming junked to get out of predicaments, according to Daniel Rudnicki Schlumberger, who jointly runs the bank’s Leveraged Finance Origination for Europe, the Middle East and Africa.
He said the process could involve things like providing new money to refinance debt, renegotiating covenants and raising equity capital. A covenant means a condition attached to existing finances.
The situation is on JPMorgan’s radar because, according to Moody’s Investors Service, the number of distressed companies rose for the first time in more than two years. Also, the number of companies rated B+ or lower, which is edging into junk territory, and have a negative outlook, is higher than it has been in a decade.
Rudnicki Schlumberger had optimism for the future, though, telling Bloomberg the bank thinks it can find “the right package for borrowers and debt holders.” He said it would likely require more creative thinking than their similar work of recent years’ past.
A Bloomberg poll of economists has European growth poised to fall as low as 1 percent next year, which could contribute to an increase in demand for refinancing and restructuring services. A 2017 survey had over 300,000 UK companies in financial distress, the highest number in five years.
The results of the economic slow down are already being felt, with one prominent example being the collapse of iconic British travel agency Thomas Cook earlier this year.
JPMorgan Chase participated in a turnaround this year to help French supermarket chain Casino Guichard-Perrachon SA get back on its feet. Assisting distressed firms in 2020 could likely be a growth segment for the bank.