COVID-19 has changed the economic landscape of the world. Right now companies and banks around the U.S. are doing their best to rebuild and make plans for the coming months.
Experts at Dorsey & Whitney are helping companies/banks navigate this uncertain time and plan for what life will be like for them and what we can expect to see over the next six months.
What does value investing really mean? Q1 2021 hedge fund letters, conferences and more Some investors might argue value investing means buying stocks trading at a discount to net asset value or book value. This is the sort of value investing Benjamin Graham pioneered in the early 1920s and 1930s. Other investors might argue value Read More
Jamie Whatley is a partner at the international law firm Dorsey & Whitney in its banking and bankruptcy practices and co-Managing Partner of its Dallas office.
The Changing COVID-19 Economic Landscape
Based on discussions with clients and colleagues, Whatley says that "bankruptcies are certainly on the rise, as there has been no real solution for certain industries, like oil & gas, retail travel and restaurants, which were already in deep trouble prior to the Coronavirus pandemic." According to Whatley, the pandemic has a perfect storm, only exacerbating problems for these companies, not the least of which include Chesapeake Energy, which filed bankruptcy last week, and JC Penney, which filed bankruptcy last month." "Both had faced struggles for several years.”
Whatley says “while some industries, like manufacturing, are growing their way out of the government shutdowns, it's been too early to predict a positive trajectory for most industries. She says many ailing companies may face further challenges in the third and fourth quarters of 2020, due to new incidences of Coronavirus.”
From the number of deals transacting, Whatley says that “private equity reports deal flow has declined between 70 to 80 percent and they don’t expect a return to historic levels until at least the first quarter of 2021.” She says: “that means there is a lot of dry powder waiting on the sidelines for future deals to pick up.”
Whatley also notes that “commercial real estate will remain in flux as companies reassess work from home and flex space, and retail slowly vacates some of this space.”
Moreover, “banks and financial institutions have not really seen the full effect of what is going to happen next,” says Whatley, “but they should start seeing some of the fallout shortly, when companies are required to start submitting second quarter financial statements to their lenders in July and August 2020.”