BNP Paribas to exploit credit crunch with new distressed finance group
French bank BNP Paribas is to create a distressed finance group to take advantage of the credit crunch and snap up assets at discount prices, it said yesterday.
The new unit will be led by Alain Dib, formerly the co-head of European high-yield markets. The bank plans to expand its distressed trading operations by providing financing for companies in need of restructuring and liquidity.
Dib will report to Frederic Janbon, global head of fixed income, and Dominique Rémy, global head of financing businesses. And the new group’s US operations will be headed up by Monique Hill, who is already in charge of the bank’s distressed trading operations in the US.
In a statement, the bank said: “BNP Paribas believes that the current market dislocation and economic outlook will bring attractive business opportunities in the fields of distressed trading, rescue financing and turnaround investing.”
Distressed trading involves buying and selling the loans of struggling companies at a discount, in the hope that the loan price in the secondary market will rise. The purchasing bank can also end up with a stake in the company in the event of a debt-for equity swap as part of debt restructuring.
The default rate for companies in the US and Europe is expected to rise sharply in the coming months.