Amid expectations of a possible uptick in restructurings in 2015 and beyond, Baker Botts has lured the head of Goodwin Procter’s financial restructuring practice to its office in Manhattan.
Emanuel “Manny” Grillo is now a partner in the restructuring practice at Baker Botts. Grillo specializes in representing creditors, debtors, trustees, buyers, and sellers in domestic and cross-border restructurings.
In a discussion with IFLR1000, Grillo acknowledged that restructurings have been slower over the last 24 months, but noted the high levels of debt in a variety of industries.
“The federal government has pushed its leveraged lending guidelines again, because they were getting nervous about the amount of leverage being offered by regulated institutions in the marketplace. Given those factors, you’ve got a timing issue. Some companies are ultimately going to find the levels of debt unsustainable,” Grillo said.
“Multiples of EBITDA [earnings before taxes, interest, depreciation, and amortization] have been increasing in new loans, worrying the feds that not everyone is going to make it in that environment. Thus, we’re confident that the restructuring work is going to come back at some point. It’s a lot like 2007, with the amount of credit that’s been extended out there. Where historically loans capped out at four times EBITDA, they are pushing five and six times, increasing the debt loads on companies,” he commented.
Contemplating a possible increase in interest rates in the next couple of quarters, Grillo wondered how much pressure such a development will put on companies that leveraged up in the last 18 to 24 months.
“Look for example at certain sectors of the energy industry, which is undergoing commodity price-driven volatility. Will that force people to think about the risks they face in the market?” he asked.
Grillo holds a J.D. from Fordham University School of Law and a B.S.F.S. from Georgetown University.