Wednesday, November 12, 2008
Banks latest move – Debt for equity swap considered
KPMG says that the banking industry is setting private equity style departments as their ownership of businesses increases in the worsening economic environment. It says that with bad debts multiplying in businesses and no market to sell on distressed debt, a debt for equity swap is an option for a lender whose interest cannot "crystallised".Philip Davidson, head of restructuring at KPMG, says: “We predict a large increase in debt for equity swaps as trading conditions worsen, particularly in the first half of next year. "This changes fundamentally the role of the bank’s relationship with a business, particularly where banks end up with a controlling interest. "Each of the big commercial banks has set up a department to manage their increased ownership responsibilities.