Last week, we and a few of our colleagues here at Dechert attended CREFC’s 2013 Distressed Debt Summit. Echoing the mood at January’s CREFC conference, the mood at the NY Athletic Club last week was upbeat about the CMBS market as a whole but the general sentiment, with respect to the distressed debt market, is that good deals (in other words, deals worth making) are harder and harder to come by.

Many of the panelists illustrated this general sentiment by noting that:

(1) spreads are compressing—strike that—have compressed,

(2) it is harder and harder to get the yields desired (again, something we can all probably relate to),

(3) it is challenging to find distressed debt worth buying (would Europe just hurry up and sell already??),

(4) low interest rates are making this a good time to be a borrower but the concern regarding refinanceability in 5-10 years is starting to creep into the market (but not enough worry to stop lending—thank goodness!),

(5) risk retention and all of the bad things that will likely go with it (freezing the B-piece buyers market, making investment grade bonds illiquid if B-piece buyers buy them to make the risk retention thresholds and then have to hold onto them (who thought of this again?), CMBS market becoming less competitive as a result (good news for lifecos)…) are on folks’ minds, especially those in the B-piece bracket, and

(6) Europe’s crisis is looming on the horizon (this may be the Black Swan in Camo).

At this point in 2013, it appears that the market is bustling. Now, in the U.S., if only the regulators will either act or not act (the latter being our desired outcome) and bring finality to the guessing game and, with respect to Europe, well…we’d like to think that the proposed legislation regarding the safety of bank deposits in Cyprus, for example, will make the US more and more attractive (which isn’t a bad thing) and at some point, we will see banks selling portfolios like we saw over the past two years in the U.K. but for now we are enjoying the bustle!

By: Krystyna Blakeslee and David Pildis