Herman Brunson raises an excellent question on a previous post, Private Equity Pain. Will creditors rework loans? I think that the whole securitization model complicates the situation because it's harder to modify loans that are part of pools. But it does seem like reworking loans would be a better bet than having loans that end up crippling borrowers, no?
I think one of the next big trends will be creditors renegotiating debt for companies facing trouble. As it stands right now, creditors and investors are absorbing massive losses as value and income completely disappears. Creditors are faced with the choice of negative returns and losses versus a choice to work with borrowers and renegotiate terms that allow these companies and borrowers to remain viable. While this lowers near-term revenue and margins, it is a much better long term option for both parties.
I'm curious what others think?