Real estate has held on to the dubious title of Europe’s most troubled sector in law firm Weil Gotshal & Manges’ latest quarterly European Distress Index.
The sector landed ahead of healthcare and retail and consumer goods, with industrials and travel, leisure and hospitality rounding out the top five.
In the second half of the 10 most distressed sectors were oil and gas; infrastructure; financial services; technology, media and telecoms; and commodities and natural resources.
The firm said that distress levels in real estate have shown signs of easing, noting that property value declines have flattened. But the outlook remains “challenging”, the team said, especially for companies with high leverage ratios that are struggling with refinancing debt.
Andrew Wilkinson, Weil’s senior European restructuring partner and co-head of the London restructuring practice, said: “While inflationary pressures are easing, the cost of capital remains a critical concern for businesses, particularly in capital-intensive sectors.
“Weaker investment metrics and squeezed liquidity were the principal drivers of distress, reflecting a challenging outlook for highly leveraged companies facing elevated costs of capital.
“The anticipated gradual interest rate cuts should provide some relief, but a strategic approach will be necessary to navigate the ongoing uncertainties. Strategic planning and prudent financial management will be key for businesses navigating this complex landscape.”
The firm’s index uses data from more than 3,750 listed European companies and a variety of financial market indicators that it says show symptoms of corporate distress.
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