January 2014


The markets continue to confound -- a real but uneven housing recovery, mixed signals on whether fourth quarter growth was anemic or creating real economic momentum, encouraging and then disappointing jobs reports, all in the face of prospective tapering.  Seems like we have been having this discussion for awhile...


Emerging from this polar vortex, perhaps now is a good time to take a look at the numbers.   In this issue, AEG's Phil Van Winkle and Jon Morrison take a deep dive into corporate default rates to try to predict what comes next.   While much of the data suggests default rates should be moving up, excess liquidity and more lenient deal terms suggest we shouldn't be expecting any dramatic changes soon.


The good news for underperforming companies is that management and owners have a fair amount of runway to get things on a better track.   Will those companies take advantage of the time and address the underlying causes, or ride the wave until conditions are not so favorable?  Phil and Jon also take a brief look at two AEG clients who leveraged our expertise to significantly improve their numbers.

Phil Van Winkle, Managing Director of AEG Partners, has been retained as the Liquidating Trustee of the Trainor Liquidating Trust. Trainor Glass Company filed a voluntary petition under chapter 11 on March 11, 2012 and a Joint Plan of Liquidation was confirmed by the Bankruptcy Court on December 30, 2013. 

AEG Partners launched a new website in December 2013.  The new site better represents our recent growth and expansion of expertise.  Please visit us at www.aegpartners.com


Default Cycle Kept at Bay ....... for Now

By: Phil Van Winkle and Jon Morrison


We talk with capital providers, attorneys, investment bankers, private equity and other market participants every day and everyone sees it. Just like we all saw it in 2006/07 and in 1997/98.  Capital becomes readily available due to monetary policy or other market forces and it must be put to work.  No matter how much they may know better, investors of this capital need to do deals.  In the competition to do deals - leverage rises, pricing falls, structures deteriorate and marginal borrowers receive financing.  Guess what? It's happening again.


The question is no longer "Have we entered the danger zone?"  We have. The real questions are: "When will the day of reckoning come?" and "What can we do while we wait?"  Rampant capital availability and favorable covenant regimes can mask poor management and marginal businesses for a while, but inevitably the weight of excessive leverage or an exogenous shock to the capital markets will topple the marginal players.   Read more