Restructuring guru sees retail defaults rising

By Elena Moya

LONDON (Reuters) - Defaults in the retail sector are expected to rise next year as less money becomes available to refinance debt and consumers cope with higher mortgages, a European restructuring specialist said.

"This year is going to be worse than last year because of the absence of cheap money," said Malcolm MacAulay, European chief executive of U.S. retail restructuring firm Gordon Brothers in an interview with Reuters.

The wave of insolvencies expected to hit retailers last year failed to materialise as finance was available from hedge funds and other institutions eager to invest.

Companies such as Polestar, a printing business, or Ethel Austin, a fashion chain, were able to avoid insolvency after investors restructured the debt.

Recent turmoil in the credit markets, however, has virtually erased the appetite for high-yield issuances and other risky investments.

With a team of as many as 70 people, and through its offices in London, Paris and Cologne, MacAulay has inspected shops across Europe on a weekly basis for about 10 years. The firm is now advising Jessops (JSP.L), a struggling photo retailer that has already closed shops to survive.

Gordon Brothers, which co-invests in Toys 'R' Us in the United States, aims to buy struggling retailers that can be restructured. In Europe, Gordon Brothers co-invests in Ihr Platz, a German drug store chain.

Opportunities may also arise in Britain, MacAulay said, where retailers will also suffer as consumers are forced to shift more of their money to make mortgage payments.