After years on the sidelines, funds specializing in troubled assets are set to take center stage in the mining industry, driving deals in a sector where the top players alone plan to raise more than $30 billion through sales to cut debt.
Overall deal volume in mining and metals last year sank to its lowest level globally since 2003, according to Thomson Reuters data, as the industry’s sellers, crippled by more than $1 trillion in debt, crowded a market with very few buyers.
Bankers, funds and investors, however, say that could change in 2016, as specialist buyers rethink a market where prices are languishing, mines are losing money and the traditional competition is weak.
Funds sidelined and waiting for the right deals could amount to as much as $3 billion, according to a ballpark figure from corporate finance and restructuring firm FTI Consulting.
“The longer this commodity rout continues, the greater number of restructures,” David McCarthy, national leader for restructuring at Deloitte in Sydney, told Reuters.
“Some of those will be by existing financiers and existing equity holders. For others, the risk will be too great – and that’s where distressed opportunities will (be).”
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