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Professor Altman predicts default by Greece in annual TMA outlook address

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In his annual Corporate & Sovereign Credit Market Outlook address at TMA’s New York chapter Edward Altman, a finance professor and bankruptcy specialist at New York University‘s Stern School of Business, predicted default by Greece. He reasoned that creditors must agree to a restructuring and there will be holdouts. He recommends monitoring the private sector to determine sovereign debt outcomes. This results in a high likelihood of sovereign debt default.

Professor Altman’s default rate forecast for 2012 is 4.28%. Combining austerity with higher taxes is "cutting your throat" and growth is necessary.

There was a fascinating difference of opinion and approach between Altman and panel members at TMA.  The panel predicted that low interest rates and access to the high yield market for larger corporations will lead to a bad year for the restructuring industry.  They focused on political considerations (including the French election and German interests) that they thought will result in Europe “kicking the can down the road”.

While panelists thought that the political component cannot create solvency, some thought that it can create liquidity.  Professor Altman, however, argued that political decisions can drive behavior in the short run but is concerned about lending at governmentally controlled low interest rates when fundamentals are poor.