TMA Poll: No Quick Relief for Ailing Economy

CHICAGO, Aug. 31, 2011 /PRNewswire-USNewswire/ -- Six out of ten corporate restructuring specialists think a double-dip recession is likely within six to 18 months, according to a Turnaround Management Association poll.

"Availability of financing will be a primary determinant in whether the economy goes back into recession," said Charles Moore, CTP, senior managing director with Conway MacKenzie Inc.  "If financing dries up, more companies are likely to take actions to reduce costs and conserve cash, which may push us back into recession."

The gloomy prognosis emerges against mounting evidence that relief is elusive for a limp U.S. economy. Unemployment stands at 9.2% and continues to wilt consumer confidence. Though nearly 30 percent of respondents doubted recession is likely, they still found little to cheer about.

"The current tremors in the market are really an indicator that we are in for a prolonged period of muted growth,'' said Tom Pabst, president of liquidation firm HYPERAMS, LLC.

About 10 percent of respondents are unsure about recession, and some questioned whether the Great Recession really "ended" in 2009.

"Consumer spending was driving this economy for decades, but a tapped-out consumer is now working to delever; likewise, public sector spending can no longer run deficits," said Brad Coulter, CTP, director with O'Keefe & Associates Consulting LLC. "The combination of those two factors is going to cause the economy to be in a slowdown, possibly for many years."

The Fed's decision to keep short-term interest rates near zero through mid-2013 produced near equal responses gauging the likely effect on troubled businesses. Half the respondents expect businesses to stay current on loans while the rest said businesses still are likely to falter in an enfeebled economy. Distressed companies could benefit if lenders delay loan maturities — or they could be purchased by buyers who can take advantage of low interest rates, respondents said.

"The continuation of lower interest rates will make it less likely that lenders will play hardball and more likely that companies will continue to limp along," said TMA President Mark Indelicato, a partner with Hahn & Hessen LLP.

"The primary reason for default is overleverage," said Thomas Kim, CTP, senior managing director with r2 advisors llc. "Interest rate levels are a factor, but not a driver, of defaults."

TMA, www.turnaround.org, has more than 9,000 members in 47 regional chapters, including turnaround practitioners, attorneys, investors, lenders and accountants. Follow TMA at  twitter.com/TMATurnaround.

SOURCE Turnaround Management Association