We were gratified to see robust participation in our informal survey and the results from the 125 of you who responded are reported below. The predictions point to a year of slight improvement in the economy, reduced numbers of large-cap chapter 11 cases, steady levels of defaults on corporate debt, slowly increasing interest rates, and modest stock market gains. This was pretty much what we expected and the responses were consistent with the general outlook we heard anecdotally at conferences last fall and on the holiday cocktail party circuit. It will be interesting to see how the collective wisdom pans out and we’re already thinking about a post for early 2012 reporting on how the survey results compare to what actually transpires in 2011.
1. What phrase best describes the economic outlook for 2011?
|“1929 All Over Again”||0.8%|
|“Flat is the New Normal”||33.6%|
|“Steady As She Grows”||17.6%|
|“Party Like It’s 1999”||0.0%|
2. How many super-mega chapter 11 cases (assets greater than $1 billion) will file in 2011?
|Greater than 40||0.0%|
3. What will the trailing 12-month default rate for non-investment grade corporate debt (junk bonds) be as of December 31, 2011?
|Less than 2%||11.4%|
|Greater than 15%||0.0%|
4. What industries will face financial distress in 2011?
|Banking and Finance||30.3%|
|Commercial Real Estate||71.4%|
In addition to the industries we listed, responders added: Healthcare, Hospitality, Infrastructure, Manufacturing, Municipalities, Paper/Packaging, Restaurants, Shipping, and Transportation.
(Responders could select more than one industry, so responses total greater than 100%.)
5. What will the Dow Jones Industrial Average closing price be on December 31, 2011?
|Less than 9,000||1.6%|
|9,001 to 10,000||1.6%|
|10,001 to 11,000||10.5%|
|11,001 to 12,000||29.0%|
|12,001 to 13,000||50.8%|
|13,001 to 14,000||5.6%|
6. What will the yield on a 10-year US Treasury note be on December 31, 2011?
|2.0 to 2.5%||1.6%|
|2.5 to 3.0%||5.6%|
|3.0 to 3.5%||16.9%|
|3.5 to 4.0%||42.7%|
|4.0 to 4.5%||28.2%|
|4.5 to 5.0 %||3.2%|
7. Please add any comments or predictions of your own about what 2011 will bring in the business finance and restructuring world.
This question prompted many thoughtful comments about what 2011 will bring and we’ve quoted a few of them:
“Very similar to 2010.”
“More of the same. Not much happening in any direction this year.”
“Even if employment DIPs below 8% by the end of 2011, returning to pre-recession employment will still take another two-three years.”
“Restructuring professionals are scrambling for work and Bank work-out departments are transferring credits and employees back to the front lines.”
“2011 looks to be shaping up very similar to 2006, except for real estate where problems will linger. Wild card is sovereign debt and whether the huge worldwide government deficits may continue to be financed at reasonably low interest rates. There is some (probably small) chance that financing these deficits without monetization may begin to crowd out below-investment grade borrowers which may provide enhanced opportunities for debt restructurings if maturing debt may not be rolled over on reasonable terms.”
“Interest rates will inch up slightly. The bigger issue will be rising prices of commodities and the turmoil on the businesses dependent upon those commodities, including oil, corn, soybeans, copper, steel, potash, etc.”
“I think it will feel a lot like 2005 and 2006. Just too much money out there looking for a home.”