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CREFC Miami 2024 Takeaways
1. Wave of Restructuring:
- The debate around 2024 being a critical year for deal-making and restructuring suggests a sense of urgency in the financial landscape.
- GSP’s growing pipeline of restructuring transactions indicates increased activity in this space, possibly driven by economic challenges or market shifts.
2. Rescue Capital and Preferred Equity:
- The abundance of rescue capital and preferred equity suggests that there is capital available for distressed projects.
- The challenge lies in the fact that certain projects can only be salvaged if the senior loan takes a write-down, emphasizing the complexities of the restructuring process.
3. “Extend and Pretend” Strategy:
- The persistence of the “extend and pretend” strategy by banks and CMBS (Commercial Mortgage-Backed Securities) servicers implies a delay in recognizing and addressing defaults.
- This strategy may keep the wave of defaults lower temporarily, but the regulatory requirement for marking to market could disrupt this approach.
4. Regulatory Impact:
- The anticipation that regulators will eventually require banks to mark to market indicates an expectation for increased transparency and a more accurate reflection of asset values.
- This regulatory shift could have a ripple effect in the debt fund space, potentially leading to re-margining as banks mark down loans significantly.
5. Banking Sector Constraints:
- The expectation of constrained bank lending in 2024, influenced by regulatory oversight and default uncertainties, suggests a cautious approach by banks.
- This caution could be driven by a need to manage risks and uncertainties in the market.
In summary, the financial landscape in 2024 appears to be characterized by a mix of restructuring activities, available rescue capital, continued use of certain strategies like “extend and pretend,” and potential regulatory changes that could impact the banking and debt fund sectors. The dynamics indicate a complex environment where various factors interplay to shape the trajectory of the financial industry.
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