Nicole Selby
Senior Vice President, Head of Default and Special Services at Computershare Corporate Trust
As Head of Default and Special Services, Nicole Selby oversees Computershare’s Default and Restructuring Group. Computershare Corporate Trust’s marketing team sat down with her to learn more about her world and the successor trustee market.
Click here to read Part 1 of our conversation.
How has the high-rate environment affected the role of default and restructuring specialists?
The transition from low to near-zero interest rates to higher interest rates has been a seismic shift in the global economy. For indenture trustees operating in the default and restructuring space, this means new challenges and opportunities in the way they administer distressed debt in the private and public sector.
What does that seismic shift look like and what industries has it affected?
Take, for example, a bond historically paying somewhere between 4 and 6%. In a low-rate environment, if borrowers were experiencing financial distress or revenue pressures, they had the option of refinancing the deal for a comparable or lower rate which would lower their cost of capital or ease debt service payments.
This meant corporations could simply refinance existing debt to alleviate any financial stress quickly rather than addressing the underlying causes. This allowed underlying causes of financial distress to go untreated or unnoticed for months or years. In certain sectors such as biogas and green energy, the era of extremely low interest rates at times influenced long-term capital investment decisions that led to distress later on.
How should default and restructuring specialists respond to this new environment?
With higher rates, refinancing is not always an option, so a defaulted deal is going to require some heavier lifting. For example, a default and restructuring team assigned to a bond transaction may determine that outside expertise needs to be brought in. They may hire a management consultant to dig into the operations of a business and drive new efficiencies. Or they may bring in an engineer to review plans for a project in the public-private partnership (P3) space. Every deal is unique.
What’s a recent example of this trend in Computershare Corporate Trust?
We had a recent case involving a senior living facility that was defaulting on its bond payments. In years past, they had access to capital that would have repaid the bonds, but they chose not to use them. One of our consultants brought in a financial advisor who determined that the fundamental issue was a lack of efficiency in the business. After bringing in new management, the business was running in the black in less than a year. This was a great example of how we were able to maximize bondholder value without having to restructure the debt.
The current interest rate environment requires a more hands-on approach to maximize recoveries. Assembling a team of talented professionals to analyze and solve complex problems is critical. We can no longer rely on low interest rates to postpone the hard work. That’s why I’m proud of the work my team does to dig into the details and assess each situation on a case-by-case basis.
To learn more about our default and restructuring services, please contact Nicole Selby at Nicole.Selby@computershare.com.