Outlook 2011: Analyst expects fewer defaults in 2011 for technology, media, telecom sector

By Stephanie N. Rotondo

Portland, Ore., Dec. 31 - The technology, media and telecommunications (TMT) arena is believed to be on more stable footing going into 2011 and will likely not see the number of technical defaults witnessed in the prior two years, said Chapdelaine Credit Partners analyst Lindsay Berz in an interview at year-end.

"Heading into calendar 2011, we do not see the magnitude of potential technical TMT defaults that we saw in 2009 and throughout 2010," Berz said. "This fact is largely attributable to the healthy capital markets that reigned in 2010 and resulted in many institutions being thrown a life raft of sorts - whether through amendment activity or refinancing transactions."

Berz noted the pervasiveness of the amend-and-extend trend over the course of 2010 did much to push back the maturity walls faced by many companies in the coming years but, in several cases, the actions will only serve to delay the inevitable.

The "inevitable" may occur in 2011 or even further down the road in 2012 and beyond, Berz said.

With "monster capital structures" like those of Clear Channel Communications Inc., First Data Corp., Freescale Semiconductor Inc. and Univision Communications Inc., TMT companies will be largely dependent in 2011 on not only the health of the new issue market, but the health of the macro operating environment that will either support or undermine fundamental TMT growth drivers such as advertising, semiconductor chip sales, consumer spending and the continued adoption of data-ready telecommunications devices.

"With that said, we expect increased trading volatility in 2011 as so many TMT names have traded up to or beyond fair value," Berz said.

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