Investors in distressed assets are expecting to see a marked increase in opportunities during the coming year, according to a survey. A majority of respondents expect the UK to provide the greatest opportunities in Europe, a contrast with sentiment in previous years which had highlighted German companies as being the most likely to run into trouble.

Investors in distressed assets are expecting to see a marked increase in opportunities during the coming year, according to a survey. A majority of respondents expect the UK to provide the greatest opportunities in Europe, a contrast with sentiment in previous years which had highlighted German companies as being the most likely to run into trouble.

The research from news source Debtwire, investment banking group Rothschild and corporate finance adviser Cadwalader, Wickersham & Taft indicates that property, finance and construction are seen as the most promising sectors for distressed investors over the coming year.

Andrew Merrett, co-head of European restructuring at Rothschild, comments: ‘Falling house prices, rising fuel and food prices, Northern Rock – these factors have changed the sentiment of UK consumers, and this has triggered a change in the macroeconomic environment.’

Most respondents expect the second or third quarters of 2008 to see substantial increases in the volumes of debt entering stressed or distressed territory.

One trader quoted in the research suggests: ‘A lot of companies will start to default roughly a year after the credit crunch.’

Another agrees: ‘The technical issues will become fundamental as economies slow and high leverage takes its toll. However, the covenants [on loans] are loose so it will take a while for credits to encounter difficulty, but defaults will rise in 2008.’