Is the economy improving?

WASHINGTON (Reuters) – Economic growth showed more tentative signs of improving on Wednesday as jobless benefit claims hit a four-month low last week and the international trade gap narrowed in September.

The reports followed last Friday's payrolls data showing private sectorjob growth was the best for any month since April, suggesting the economy may be beginning to pull out of its summer doldrums.

"Two months ago, three months ago there was a real growth scare and people were talking about a double dip (recession)," said Jim O'Sullivan, chief economist at MF Global in New York. "Now, the numbers are not only not showing double-dip, but they're showing reacceleration."

The number of workers filing new claims for state unemployment aid fell to 435,000 in the week ended November 6 from a revised 459,000 in the prior week, the Labor Department said. Economists had looked for claims to come in at 450,000.

The bigger-than-expected drop took a four-week moving average of claims, a better indicator of underlying trends, to its lowest level since just before Lehman Brothers filed for bankruptcy in September 2008.

At the same time, the number of people still receiving regular state benefits after an initial week of aid fell to 4.3 million in the week ended October 30, the lowest level since November 2008.

Still, analysts say the pace of job creation is not enough to pull down the United State's 9.6 percent unemployment rate.

Concern over the anemic job market was a factor behind the Federal Reserve's decision last week to pump an extra $600 billion into the U.S. economy through Treasury bond purchases.

Late Wednesday leading technology company Cisco Systems Inc (CSCO.O) reported a 19 percent jump in quarterly revenue, as more businesses upgraded their networks to handle growing Internet traffic in another sign of a recovering economy.

CHINA IMPORTS STILL NEAR RECORD

In a separate report, the Commerce Department said the U.S. trade deficit narrowed more than expected in September to $44.O billion, despite near record imports from China.

A narrower trade deficit is positive for U.S. economic growth since it suggests more demand for U.S. production.

Financial markets, however, largely shrugged off the data. Worries over Ireland's debt load helped push the U.S. dollar to one-month high against the euro and the yen early, and stocks ended little changed, as did U.S. Treasury yields.

Economists said the international trade report suggested the U.S. economy grew a bit more swiftly in the third quarter than the 2.0 percent annual pace reported late last month.

Many also said the trade deficit, which cut into growth last quarter, could be a positive in the final three months of the year. O'Sullivan said the drop in jobless claims suggests growth could pick up to 3.0 percent as the year draws to a close.

U.S. exports rose slightly in September, a third consecutive monthly gain. Imports fell 1.0 percent.

The rise in exports and decline in imports suggests a drop in the value of the U.S. dollar "might be beginning to weave its magic," said Hugh Johnson, chief investment officer of Hugh Johnson Advisors in Albany, New York.

A weaker dollar helps U.S. exporters by making American products cheaper in world markets, at the same time increasing the cost of foreign goods in the United States.

But continued high imports from China cast a shadow over the data. U.S. imports from China totaled $35.0 billion, just barely below a record set in August, while U.S. exports to the country declined fractionally to $7.2 billion.

The resulting $27.8 billion trade deficit with China, by far the largest the United States had with any tradepartner, could revive chances for the Senate to vote on legislation punishing some Chinese imports for Beijing's currency practices.

The House of Representatives approved the bill in September in the belief that China deliberately undervalues its currency to give Chinese companies an unfair trade advantage.

While many observers believe the bill will fall by the wayside following the November 2 congressional elections, some think its fate depends on whether President Barack Obama can make progress on the issue at a Group of 20 summit that gets underway in Seoul on Thursday.

The U.S. trade gap with China has swelled to $201.2 billion in the first nine months of 2010, compared to $165.9 billion in the same period in 2009.

Washington is pushing Beijing to let its currency rise more quickly in value and take other steps to spur domestic demand. On Wednesday, China ordered its banks to put more money aside as required reserves, a move that could slow Chinese growth.

(Additional reporting by Mark Felsenthal in Washington and Ryan Vlastelica in New York, Editing by Andrew Hay)

Source

Planned economy

A planned economy is an economic system in which government decisions are made by central state economic managers who determine what sorts of goods and services to produce and how they are to be priced and allocated, and may include state ownership of the means of production. Since most known planned economies rely on plans implemented by the way of command, they have become widely known as command economies. Any economic system that is centrally-planned by a government is commonly referred to as economic statism. To stress the centralized character of planned economies and to contrast the term with decentralized planning in a market economy, a more specific term, centrally planned economy, is also used. Although a planned economy may include exchanges of money, these exchanges are less important in allocating resources than the central plan.


Some advocates of a centrally planned economy claim the following advantages. The government can harness land, labor, and capital to serve the economic objectives of the state (which, in turn, may be decided by the people through a democratic process). Consumer demand can be restrained in favor of greater capital investment for economic development in a desired pattern. For example, many modern societies fail to develop certain medicines and vaccines which are seen by medical companies as being unprofitable, but by social activists as being necessary for public health. The state can begin building a heavy industry at once in an underdeveloped economy without waiting years for capital to accumulate through the expansion of light industry, and without reliance on external financing. Second, a planned economy can maximize the continuous utilization of all available resources. This means that planned economies do not suffer from a business cycle. Under a planned economy, neither unemployment nor idle production facilities should exist beyond minimal levels, and the economy should develop in a stable manner, unimpeded by inflation or recession. A planned economy can serve social rather than individual ends: under such a system, rewards, whether wages or perquisites, are to be distributed according to the social value of the service performed. A planned economy eliminates the dependence of production on individual profit motives, which may not in themselves provide for all society's needs.


Taken as a whole, a centrally planned economy would attempt to substitute a number of firms with a single firm for an entire economy. As such, the stability of a planned economy has implications with the Theory of the firm. After all, most corporations are essentially 'centrally planned economies', aside from some token intra-corporate pricing (not to mention that the politics in some corporations resemble that of the Soviet Politburo). That is, corporations are essentially miniature centrally planned economies and seem to do just fine in a free market. As pointed out by Kenneth Arrow and others, the existence of firms in free markets shows that there is a need for firms in free markets; opponents of planned economies would simply argue that there is no need for a sole firm for the entire economy.

What is the USA debt

The U.S. debt is over $13 trillion, and is the sum of all outstanding debt owed by the Federal Government.

Nearly two-thirds is the public debt, which is owed to the people, businesses and foreign governments who bought Treasury Bills, Notes and Bonds.

The rest is owed by the government to itself, and is held as Government Account securities. Most of this is owed to Social Security and other trust funds, which were running surpluses. These securities are a promise to repay these funds when Baby Boomers retire over the next 20 years. (Source: U.S. Treasury, Debt to the Penny;Debt FAQ)

The Size of the U.S. Debt:

The U.S. debt is the largest in the world. How did it get so large? Purchasers of Treasury Bonds still reasonably expect the U.S. economy to recover enough to pay them back. For foreign investors like China and Japan, the U.S. is such a large customer it is allowed to run a huge tab so it will keep buying exports. (Source: CIA World Factbook)

Even before the economic crisis, the U.S. debt ballooned 50% between 2000 - 2007, growing from $6 - $9 trillion. The $700 billion bailout helped the debt grow to $10.5 trillion by December 2008.

The U.S. Debt Level:

The debt level is the debt as a percent of the total country's production, or GDP. Total economic output, or GDP, is $14.6 trillion (Q1 2010). The debt is now 89% of GDP, up from 51% in 1988. (Source: U.S. Treasury, Debt to the Penny; Bureau of Economic Analysis)

Interest on the debt was $383 billion in Fiscal Year 2009, down from its peak of $451 billion in Fiscal Year 2008, thanks to lower interest rates. (Source: U.S. Treasury, Interest)

The most recent budget forecast from the Office of Management and Budget (OMB) showed the budget deficit at $1.3 trillion in FY 2011, more than the $1.17 trillion deficit for FY 2010, but down from the $1.7 trillion deficit for FY 2009. This is a result of the economic stimulus package, the 2008 government bailout measures and $800 billion a year Security spending. The deficit is also caused by reduced income, thanks to the EGTRRA and JGTRRAtax cuts and the Alternative Minimum Tax patch. (Source: OMB, Federal Budget Deficit)

How Did the Debt Get So Large?:

Government debt is an accumulation of budget deficits. Year after year, the government cut taxes and increased spending. In the short run, the economy and voters benefited from deficit spending. Usually, however, holders of the debt want larger interest payments to compensate for what they perceive as an increasing risk that they won't be repaid. This added interest payment expense usually forces a government to keep debt within reasonable limits.

The U.S., however, was the beneficiary of two unusual factors. First, the Social Security Trust Fund took in more revenue through payroll taxes leveraged on Baby Boomers than it needed. Ideally, this money should have be invested to be available when the Boomers retire. In reality, the Fund was "loaned" to the government to finance increased deficit spending. This interest-free loan helped keep Treasury Bond interest rates low, allowing more debt financing.

However, it is not a real "loan" since it can only be repaid by increased taxes when the Boomers do retire.

Secondly, foreign countries increased their holdings of Treasury Bonds as a safe haven, also keeping interest rates low. These holdings went from 13% in 1988 to 28% in 2009. (Source: U.S. Treasury report ”Petrodollars and Global Imbalances”, February 2006)

Even during the recession, countries like China and Japan increased their holdings of Treasuries to keep their currencies low relative to the dollar. For more, see How China Affects the U.S. Economy.

Of the total foreign holdings ($3.9 trillion), China owns $895 billion and Japan owns $785 billion. The U.K., Brazil and the oil exporting countries own about $100 - $280 billion each. The Bureau of International Settlements suspects that much of the holdings by Belgium, Caribbean Banking Centers and Luxembourg are fronts for various oil-exporting countries or hedge funds that do not wish to be identified. (Source: Foreign Holding of U.S. Treasury Securities)

How The U.S. Debt Affects the Economy:

Over the next 20 years, the Social Security funds must be paid back as the Baby Boomers retire. Since this money has been spent, resources need to be identified to repay this loan. That would mean higher taxes, since the high U.S. debt means further loans from other countries have been maxed out. Unfortunately, it is most likely that these benefits will be curtailed, either to retirees younger than 70, or to those who are high income and therefore theoretically don't need Social Security.

Secondly, many of the foreign holders of U.S. debt are investing more in their own economies. Over time, diminished demand for U.S. Treasuries will increase interest rates, thus slowing the economy.

Furthermore, this lessening of demand is putting downward pressure on the dollar. That's because dollars, and dollar denominated Treasury Securities, are becoming less desirable, so their value declines. As the dollar declines, foreign holders get paid back in currency that is worth less, which further decreases demand.

The bottom line is that the large Federal debt will ultimately slow the U.S. economy.

Source

National Debt Road Trip

Agein & agein: the usa debt

NEW YORK, Nov 10 (Reuters) - The Federal Reserve's planned bond purchases will reduce dollar-denominated debt supply next year and could drive corporate and other credit spreads tighter as well as push U.S. Treasury yields back to historical lows.

Fixed income and other financial markets have been roiled in the past 24 hours by worries the Fed will succeed only too well at its goal of fueling inflation. However, the new round of Fed buying has not even begun.

In total, the Fed said last week it would buy more than $800 billion in Treasuries, including re-investment of maturing debt in its existing portfolio. The plan is aimed at rekindling economic growth by driving down yields and encouraging investments that will spark private lending.

Analysts at banks including Credit Suisse, JPMorgan and RBS (LSE: RBS.L - news) Securities predict the purchases will cause the overall supply of fixed income assets available to investors to dwindle.

When accounting for the Treasuries purchases, the banks predicted the overall supply of fixed income assets, which includes corporate bonds, municipal, mortgage-backed and other debt, will fall by more than 40 percent in 2011, even as demand for fixed income remains strong.

RBS expects net supply of high quality dollar-based fixed income assets in 2011 to total around $1.35 trillion, which after accounting for Fed purchases of $660 billion would leave $690 billion for other buyers. Buying by foreign central banks, however, may tie up the bulk of remaining purchases, it said.

"You've taken out all the supply of high quality dollar assets before private investors have even opened the door," said John Briggs, U.S. interest-rate strategist at the firm.

"This is what the Fed wants, to drive Treasury yields lower and drive investors to alternative assets. There's not enough supply to go around with the Fed purchases so investors need to reach for yields," said Briggs, in Stamford, Connecticut.

Foreign official institutions may buy around $540 billion in Treasuries next year, RBS said. In that case only $150 billion would be available to other investors, it said.

SUPPLY TO SINK

Net issuance of other fixed income asset classes is unlikely to offset the Treasury purchases.

Credit Suisse expects net fixed income debt supply to fall 46 percent to $822 billion, from around $1.5 trillion in 2010.

Supply of U.S. agency mortgage debt is expected to jump to $559 billion, after seeing a loss of $86 billion in 2010. However this growth will be more than offset by the drop in Treasury and US agency supply, Credit Suisse said. Sales of agency mortgages may rise though net issuance of corporate, asset-backed and municipal debt is also likely to be largely unchanged, it added.

JPMorgan projects that net issuance of Treasuries, high grade and high yield bonds, build America municipal sales, emerging market corporates and structured assets will drop 40 percent to $600 billion in 2011, from around $1 trillion in 2010. This figure has dropped from $1.9 trillion in 2007, the bank said.

Companies are expected to continue to be among the largest gainers from the Fed's purchases, as dwindling supply will allow them to sell debt at even lower costs.

"In the short term the supply of bonds is going to dwindle and the yields are going to go down and the price of credit for issuers is going to go down," said David Rubenstein, chief financial officer and general counsel at credit hedge fund BlueMountain Capital Management in London. "It becomes an artificially cheaper source of capital than it otherwise would be."

Loose credit markets, however, may encourage companies to increase leverage in order to favor other investors such as shareholders and allow some companies to access capital that they would not otherwise have access to without the stimulus.

"At some point the artificial price support will run out and the companies that couldn't otherwise have raised debt at those coupon levels are going to suffer and their bonds are going to suffer," said Rubenstein. "The risks are that when the stimulus goes away, what's going to happen to the price of credit at that time?"

TREASURY YIELDS TO STAY LOW

The Fed's purchases are also likely to keep a cap on short to intermediate maturity Treasury yields, and could send some yields even lower as investors extend duration.

"A lot of money managers are already underweighting the front end of the curve, very few money managers are fully invested in two- to three-year maturities because the yield there is so low it just doesn't make sense," said Igor Cashyn, Treasury and TIPS analyst at Morgan Stanley (NYSE: MS - news) in New York.

RBS and Morgan Stanley are among banks that project benchmark 10-year Treasury yields will drop to around 2.25 percent, from their current 2.6 percent. Credit Suisse expects the notes will trade in a range between 2.25 or 2.8 percent.

"It's difficult to be short in this environment, that's the key takeaway. Its difficult to be short Treasuries with the Fed buying a huge bunch of them," said Ira Jersey, interest rate strategist at Credit Suisse in New York.

Source Yahoo! Finance

The USA debt

Reagan got elected by telling the country the debt was "out of control." Compared to national income, it was the lowest in 50 years. He probably didn't know. But his supply-side economists did. They lied to America.

In 1981 Reagan's supply siders wrote the tax cuts for the rich and his budgets. The Senate was Republican, and Reagan got the Southern Dems in the House to vote for him. All Republicans and a few Dems voted for the budget. The national debt had its worst year since 1945. The next year it got worse, and for 20 out of 20 years, the supply siders raised the debt relative to our ability to pay.

Source 

USA goverment dabt

One of the nation's foremost economic minds is sending an alarm signal regarding the U.S. budget deficit and national debt.

Former U.S. Federal Reserve Chairman Alan Greenspan said he's not "overly concerned" about the recent weakness in the U.S. dollar, Bloomberg Newsreported Thursday. However, Greenspan is concerned about the long-term costs to the United States associated with its rising national debt.

"There are equations in which certain relationships become progressively explosive," such as if a spiral starts in which increasing interest payments increase the deficit and debt, leading to another increase in interest payments, and so on, Bloomberg News reported. 

Fiscal Analysis: Policy makers in Washington should heed Greenspan's words. Even with recent weakness, the dollar has basically returned to its level before the financial crisis; moreover, the dollar's value is partially a function of the large U.S. budget deficit and national debt. On the latter, presently, interest rates are relatively low, with the United States still benefiting from a flight-to-safety into U.S. Treasuries, which has lowered long-term interest rates below what they would have been in normal times (the rate the U.S. government pays on its bonds is certainly lower than the rate lenders would charge other nations, if they had a similar per capita national debt). 

However, the period of relatively low interest rates will not last forever. As the global recovery accelerates, institutional investors will rotate out of safe Treasuries and into higher risk/higher return investments, and long-term interest rates will likely rise -- increasing the U.S.'s borrowing costs. The specter of rising rates is one major reason why, after a deficit-cutting health care reform package is passed, Congress must turn its attention to cutting the budget deficit -- including further spending cuts and a tax increase. If Congress acts courageously, the budget can be balanced by fiscal year 2016, assuming a normal GDP growth rate in the U.S.

- -

Financial Editor Joseph Lazzaro is writing a book on the U.S. presidency and the U.S. economy.

Source

United states debt

The Outstanding Public Debt as of 10 Nov 2010 at 03:12:35 PM GMT is:
 $ 1 3 , 7 3 2 , 2 9 1 , 0 4 1 , 5 1 4 . 6 9 

The estimated population of the United States is 309,454,334

so each citizen's share of this debt is $44,375.82.

The National Debt has continued to increase an average of $4.15 billion per day since September 28, 2007!

USA population

The current U.S.A. population is over 310 million people (310,300,000 in late 2010) so the United States has the world's third largest population (following China and India).

As the world's population is approximately 6.8 billion, the current United States population represents a mere 4.5% of the world's population so about one in every twenty people on the planet is a resident of the United States of America.

In 1790, the year of the first census of the U.S.A. population, there were 3,929,214 Americans. By 1900, the U.S.A. population jumped to 75,994,575. In 1920 the census counted more than a hundred million people (105,710,620). Another 100 million people were added to the United States population in just fifty years when the two hundred million barrier was reached in 1970 with 203,302,031 counted in the census.

The 2000 Census counted a U.S.A. population of 281,421,906. Six years later the U.S. population had grown to 300 million. At 7:46 a.m. (Eastern Time) on Tuesday, October 17, 2006 the U.S. Census Bureau estimated that the United States population officially reached 300 million.

The U.S. Census Bureau expects the U.S.A. population to grow to reach these estimates over the next few decades:

• 2010 - 309,162,581
• 2020 - 336,031,546
• 2030 - 363,811,435
• 2040 - 392,172,658
• 2043 - 400,527,776 (the year of 400 million)
• 2050 - 420,080,587

The Population Reference Bureau succinctly summarized the state of the growing U.S.A. population in 2006, "Each 100 million has been added more quickly than the last. It took the United States more than 100 years to reach its first 100 million in 1915. After another 52 years, it reached 200 million in 1967. Less than 40 years later, it is set to hit the 300-million mark. Within another 37 years, we are projected to pass 400 million."

In 2050, the United State population will remain the world's third largest (with India as number one and China as number two). Number four Nigeria is expected to have more than 120 million fewer people than the U.S. population in 2050.

The United States' total fertility rate is 2.1, which means that, on average, each woman gives birth to 2.1 children throughout her life. The total fertility rate of 2.1. means a stable no-growth population overall. However, immigration plays a huge impact on the growing U.S. population. Overall the United States population is growing at 0.9% a year as of 2007.

Source 

The debt people

Around 366 people a day entered insolvency during the third quarter of 2010. This is the sixth consecutive quarter that has seen personal insolvency levels in excess of 33,000. A record 6,900 people entered a Debt Relief Order (DRO) in the last three months, up 10 per cent on the record levels of Q2 2010. More than 13,100 people entered an Individual Voluntary Agreement (IVA), almost on a par with last quarter’s record total.



The UK remains on track to see a record 140,000 personal insolvencies this year, despite a slight fall in the latest quarterly totals.

Analysis of personal insolvency statistics by RSM Tenon Tracker, the real-time insolvency monitor, found that around 33,700 people entered personal insolvency during the third quarter of the year.


This represents a fall of three per cent compared to the previous three months, but is still far in excess of pre-credit crunch totals.



Key statistics



Around 366 people a day entered insolvency during the third quarter of 2010

This is the sixth consecutive quarter that has seen personal insolvency levels in excess of 33,000

Just over 13,600 people were declared bankrupt during the last quarter – the lowest level since the end of 2005

A record 6,900 people entered a Debt Relief Order (DRO) in the last three months, up 10 per cent on the record levels of Q2 2010

More than 13,100 people entered an Individual Voluntary Agreement (IVA), almost on a par with last quarter’s record total

Mark Sands , the Head of Bankruptcy at RSM Tenon, the UK’s seventh largest accountancy firm, commented on personal insolvency levels saying, “Personal insolvency levels fell by three per cent compared to the previous three months, the lowest quarterly total since Q2 2009.


“Personal insolvency levels have remained broadly consistent over the last eighteen months. We fully expect to see inflated annual insolvency levels last until the Olympics.


“If anything, people will face even greater difficulties in the coming months with public sector cutbacks likely to leave many people facing a period of unemployment and reduced wages. These new challenges will be a step too far for a significant number of people that have continued to struggle with debts that have been built up over several years.”


Bankruptcies fell to 2005 levels, down nine per cent on the previous quarter.


“With other options available, people have come to see bankruptcy as the last resort and are increasingly willing to consider other options to address their financial difficulties. As such, the dramatic fall in the number of bankruptcies actually has little bearing on overall personal insolvency totals,” sands noted. 


The popularity of Debt Relief Orders (DROs) continued to increase, up eight per cent on the previous quarter.


“With DROs being the cheap and cheerful option for people looking to resolve their financial difficulties, it is not surprising that people are using this method to write off their debts. DROs cost less than a sixth of the £600 needed to go bankrupt and do not require a court appearance or an interview with the Official Receiver. The continued increase in DROs also suggests that people are being more proactive in addressing their troubles before they spiral out of control and require more extreme solutions,” Sands added. 

IVAs see a slight (two per cent) drop from last quarter’s record levels.


Sands pointed out that the continued popularity of IVAs will largely be defined by the impact that public sector cuts will have on employment levels.


“IVAs require a commitment to a payment plan, usually over five years, and are therefore dependant on people having a regular income. A dramatic increase in unemployment could therefore force people to turn to other solutions, such as bankruptcy, to address their financial difficulties,” he said.

Source  Cpifinancial.net

Distressed debt

"The best period for buying distressed debt in our careers was 12 to 18 months ago," declared Apollo Management’s Leon Black in February this year. "Now there are opportunities for restructurings on a selective basis but it is not as easy as it was a year ago." This view is supported by the drop in the S&P/LCD rate of default figures, which have seen the default rate for large US corporates slump from a peak of 11% in the fourth quarter of 2009 to 3.75% today.

But the story is very different in the mid-market, which has been left largely untouched by the revival in syndicated lending and the boom in high-yield bond issuance. While large and middle-market corporate default rates tracked each other relatively closely until mid-2009, the fall in large corporate defaults has been against a continued rise in mid-market casualties – with defaults in this part of the market now approaching 12%.

"Small corporations are where steep discounts still exist and this is where the opportunity in distressed investing is"

Patrick Flynn, Neuberger Berman Fixed Income

"One view is that the markets have fixed themselves and distress is over," says Patrick Flynn, managing director at Neuberger Berman Fixed Income in Chicago. "But smaller companies are too marginal for the high-yield market and banks are still not lending to them. Small corporations are where steep discounts still exist and this is where the opportunity in distressed investing is."

It seems that a fair number of investors agree with him. When Neuberger Berman announced its intention to float a distressed debt investment fund in April this year it was targeting $150 million. However, it attracted $197 million of interest. It is therefore now raising a second fund with a target of $75 million and is confident of exceeding this figure.

"There was a sense that the first fundraising was disrupted because of the sovereign debt crisis earlier this year," Flynn explains. "People want exposure to distressed opportunities and many prefer this structure to an LP structure [the limited life fund has a three-year investment period from the time of the IPO]."

Neuberger Berman is not alone in seeing the distressed debt opportunity as far from over. Hedge fund CQS recently spun off its distressed debt strategy as a standalone hedge fund after it returned 55% last year.

The new CQS Distressed Opportunities Fund manages about $50 million. Also in the US, asset managers Avenue Capital and Tennenbaum Capital announced plans to raise $3 billion and $1 billion respectively for distressed funds earlier this year.

In June European Credit Management announced that it had hired Milos Brajovic and Sohail Malik to launch and manage a new European Special Situations Credit Fund. Alchemy Partners, Oak Tree Capital Management, Intermediate Capital Group and Apollo Management have all raised new distressed funds focused on Europe this year. And Dubai-based Essdar Capital Managers (which is majority owned by the Abu Dhabi royal family) is planning a new $500 million fund to exploit distressed situations across the Gulf region.

With general consensus that the so-called ‘extend and pretend’ game has played itself out, these investors expect that the much-vaunted refinancing wall of 2013 to 2014 will provide rich pickings for them.

However with leveraged loans and high-yield bonds both enjoying a robust 2010, that refinancing requirement is not looking as bleak as it once was. According to Credit Suisse, $208 billion of leveraged loans larger than $500 million are due to mature between 2011 and 2014.

But $392 billion of leveraged loans smaller than $500 million are due to mature during the same period, many of which have little chance of being refinanced in either the syndicated loan or high-yield markets before then.

Institutional leveraged loan maturities

As of March 2010

Source: Credit Suisse

Best opportunities

It is for this reason that Flynn emphasizes that the small-cap sector is where the best opportunity lies: "The billions of dollars that have gone into distressed investing have gone to a few very large buyers which focus on large cap. They do not go down this small." The competition in the mid-market has historically come from bank prop desks and hedge funds.

Neuberger Berman is targeting its funds in the US and Canada, where lending to mid-market companies was dominated by CLOs before 2007.

"Between 50% and 60% of this market was CLOs as they had to show a high degree of diversification in their portfolios," says Flynn. Although he admits that "the easy money is in the rear-view mirror" he explains that evaluating the underlying assets can be far more straightforward in the mid-market as the capital structures are far simpler, with few of the intercreditor complexities that have plagued some of the larger distressed corporates. "The difference in the situation of large and small companies is the world that structured credit has made," he says.

There is no doubt that the days of 2008 when you could simply buy performing loans at 60 cents on the dollar and watch them trade back up to 80 cents later are long gone – this is the opportunity that firms such as Apollo Management took such advantage of and that Black was referring to earlier this year. But the number of firms still prepared to focus on the hard graft of corporate restructuring shows that plenty of opportunity – and distress – remains.

Source  Euromoney.com