Distress Next Year
GM will not file bankruptcy in 2006. There will be some asset sales which get rid of much of the problem, but the tumor will remain in GM's management. Autos will continue to have trouble and you will two or three more supplier 11s. Ford may file chapter 11, somewhat unexpectedly. A distressed merger between GM and F (regardless of whether one is in 11 or not) will be attempted, but will fail.
Any airline that didn't file in 2005 is in trouble in 2006 (this does not include JetBlue or SWAL however). If I were a long equity type, I'd look for recent chapter 11 grads to be aggressive and ready for growth. Any airline that talks merger is a loser, in my opinion. Stick with the guys who are looking to grow through lower prices and better service. As for distressed plays, Northwest continues to be interesting to me.
I'm not able to go into a huge amount of detail here. This will take some time to play out. My guess is a deal is reached on the supply contracts. Obviously May is the man and shows a positive movement.
All in all
I don't think 2006 will be a huge year for distress. Mostly what you'll see are vultures moving out of equity positions in recently emerged companies. There will be a lot of intrigue there, and the possibility for some more negative hedge fund articles in the financial presses. The beneficiary of course will not be vultures as much as private equity players, who will again be spinning the story all the way to CNBC studios. The general economy will do ok. The first half of the year will be tough, the second-half a little better (this is opposite what the parrots are saying).
As for me
As many of you have heard, my organization has successfully raised and launched a macro fund which will see its first full year of operations in 2006. It is true that I will be advising them, but it is silly rumor that I'm departing the distressed debt world. I still fly with vultures. Happy New Year everyone. Come see me soon!