Winding Up — Political turmoil and market volatility on the Christmas menu

Alessia Argentieri

13 December 2024•13 min read

Winding Up is 9fin's weekly newsletter, incorporating summaries and commentary from our European distressed coverage for the past week. Sign up for this newsletter here.

It's beginning to look a lot like a politically volatile Christmas. With trouble at home for some of the largest European economies, the somehow more calming news this week was the European Central Bank’s interest rates cut, the fourth in 2024, with further easing expected in the coming months. And yet, the year is closing once again under the sign of “self inflicted uncertainty”, in the words of ECB President Christine Lagarde.

How long the new French government will last is everyone’s guess. Today (13 December), President Emmanuel Macron named centrist leader François Bayrou as France's next prime minister, hoping to tame the turmoil that has entangled the country’s politics since he called a snap general election in June. Last week, Michel Barnier was forced to leave the job after just three months with a no-confidence vote from the parliament.

Germany is on a similarly uncertain route. After the coalition government collapsed in November, Chancellor Olaf Scholz formally requested a confidence vote this week, setting a path to early elections in February. In the meantime the economy continues to deteriorate: Germany’s gross domestic product (GDP) is set to stagnate in the coming months, according to the latest Bundesbank forecast, which was published today (13 December). The economy is not only struggling with “persistent economic headwinds”, but also with “structural problems”, while the labour market is being affected by the “protracted weakness of economic activity”, said Joachim Nagel, president of the Bundesbank.

Over in the UK, the British economy has shrunk for a second straight month, recording the first consecutive drop in GDP since the onset of the pandemic, according to a report published today (13 December) by the Office for National Statistics.

As we know, bad news can be good news for the restructuring market, and several advisors have been busy pushing deals over the finish line. The sector is expected to pick up steam even more in Q1 25 with a flurry of litigations and an increase in LMEs, one of the most active advisory firms in the space told 9fin. The European market is becoming more sophisticated in mastering strategies already common in the US, they believe.

One of the sectors where distressed opportunities are expected to boom is automotive, which has been showing signs of weakness since the beginning of the year — and has now taken a turn for the worse, as a 9fin analysis highlighted this week. On average, bonds issued by European auto suppliers have dropped 1.5% in price over the past year, with the worst performers including Standard Profil, ZF, Adler Pelzer, Pasubio, and Grupo Antolin.

With so much still ongoing, we will be busy until the very last minute before the Christmas break. Next week, 9fin will be on the front line following two court hearings. Tuesday 17 December it’s the adjourned convening hearing for the Specialty Steel, which has proposed a restructuring plan designed to avert a liquidation of the business by releasing around £578m in liabilities. But the big name on everyone’s mind is Thames Water. The troubled water company is scheduled to appear on London’s High Court to ask for permission to convene its creditors to vote on its restructuring plan, but its junior noteholders’ fight is not over and legal battle could ensue.

This week’s news

Kloeckner Pentaplast — The German plastic packager had its refinancing efforts and Q3 24 earnings impacted by an unexpected de-stocking in its pharma segment, CFO Marc Rotella said during the earnings call on 12 December. An update on the company’s cap structure might arrive in the next 90-180 days with a regular refinancing still the preferred route.

OHLA — The Spanish construction company announced that it received over 90% approval from its noteholders for its restructuring plan by the early bird deadline on Monday (9 December). The consent solicitation will remain open until the final deadline to vote at 11 am CET (10am GMT) on 6 January. 9fin’s Restructuring QuickTake is here.

OQ Chemicals — SVP and Blantyre Capital are to take control of OQ Chemicals under a recapitalisation plan put to lenders last week, according to 9fin sources. The plan has so far garnered over 75% consent from the wider lender group, the sources said.

Specialty Steel UK — The subsidiary of Sanjeev Gupta’s GFG Alliance adjourned its application to convene its creditors for the purposes of voting on a restructuring plan, following complaints from a group of secured lenders. The adjourned convening hearing is on Tuesday 17 December. 9fin’s Restructuring QuickTake is here.

Tullow Oil — The UK oil & gas company said on Thursday (12 December) that it is in talks with Kosmos Energy for a potential takeover of the company. Kosmos has until 9 January to make a firm offer. Kosmos confirmed it is in preliminary discussions with the company, but added that there is “no certainty” that any offer will be made.