"The direction of travel is moving away from Europe towards
the UK, which is beginning to look much more at risk due to
higher inflation as well as increased operating and input
costs," said Andrew Wilkinson, senior partner and co-head of
Weil's London restructuring practice.
Real estate across Europe remains the most distressed sector
by some margin, the index showed.
Weil said that in Britain, the housing sector is only just
recovering from turmoil unleashed by the government's
mini-budget in September, and continues to struggle.
The mini-budget sparked a surge in government borrowing
costs and mortgage rates.
The recent collapse in the U.S. of Silicon Valley Bank and
rescue of Credit Suisse by UBS in Europe have also put the
banking sector under the spotlight.
"The financial system certainly has some elements of
fragility but we do not expect another banking or sovereign debt
crisis," Wilkinson said.
(Reporting by Chiara Elisei; Editing by Dhara Ranasinghe and
Alexander Smith)
By Chiara Elisei
LONDON, March 23 (Reuters) - Corporate distress levels
in Britain accelerated in the three months to February to their
highest since June 2020, an index compiled by law firm Weil
Gotshal & Manges shows.
But corporate distress across other big European countries
slowed marginally as expectations of a deep and prolonged
recession eased according to the index, which measures the
number of companies facing difficulties in paying their debt.
The study, which aggregates data from more than 3,750 listed
companies and financial market indicators, is tracked against
default rates and shows a roughly 12 month-lag before distressed
levels translate into actual default rates.
This suggests that default rates will start rising soon. S&P
expects default rates to reach 3.75% and 3.25% in the United
States and Europe, respectively by September, more than double
the 1.6% and 1.4% in September 2022.
Weil's quarterly European Distress Index rose to 3.1 in the
quarter to February, versus 3.0 in November. The UK Distress
Index, a component of the European index, hit a 6.7 peak versus
3.5 the quarter before.
A sub-index showed that distress in the European real estate
sector was stable at 4.7 versus the prior quarter, but remained
higher than a year before, when it was negative 2.4.
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