By Michael Smith, the Head of the Bank’s Business Finance Division.
Michael Smith, the Head of the Bank’s Business Finance Division, discusses how the nature of corporate workouts is changing with the globalisation of financial markets. The involvement of larger, more internationally diverse lending groups means that, in the absence of international harmonisation of insolvency law, the most effective approach to workouts will be some form of international understanding, building in part on the past successes of the ‘London Approach’. He describes the London Approach as a flexible framework rather than a detailed set of rules, which can be adapted in line with changing market practices. He sees the development of a secondary market in distressed corporate debt as having a potentially helpful role to play in future workouts and assesses its likely impact. He concludes by stressing the need for an orderly, professional market.