Spate of bank rescue deals for high street restructurings can't last forever

Habitat, Thorntons, Jane Norman, AllSaints… in recent weeks restructuring activity has been all about the high street and, with the possible exception of DLA Piper, which has worked on a string of high-profile mandates for struggling stores, there seem to have been very few winners.

The last few weeks alone have seen DLA and Maclay Murray & Spens appointed on the pre-pack and sale of struggling fashion chain Jane Norman; Linklaters and Salans brought in on the administration of Habitat and sale of its UK brand to Home Retail Group; and Shoosmiths mandated to advise chocolate maker Thorntons on a strategic review set to result in up to 180 shops closing across the UK.

Go back little more than a month further, and Simmons & Simmons and Taylor Wessing picked up positions on HMV's restructuring and associated sale of Waterstones, with DLA and SJ Berwin advising on the private equity rescue of London fashion brand AllSaints Spitalfields.

Against a backdrop of higher inflation, rising costs of living and reduced consumer confidence, the high street was always going to be vulnerable, but right now it's looking particularly desperate. However, to date it still remains striking how few full-scale insolvencies there have been.

As HMV and Thorntons have shown, many retailers have so far managed to avoid insolvency as banks, still keen to avoid looking like the bad guy responsible for thousands of job losses (not to mention being aware of the expense of insolvency in terms of adviser fees in a market where exits are not easy to achieve), agree to refinance debt packages, while private equity buyers and hedge funds have been snapping up other struggling chains like AllSaints.

Even in the increasing instances where administration procedures are happening, as with Habitat or Jane Norman, some parts of the business are living on through acquisitions. As the head of restructuring at one top 10 law firm comments: "Insolvency now is really a delivery mechanism for the next stage in an accelerated M&A process."

However, there is only so much banks can do, and more law firms are now picking up mandates as landlords, whose quarterly rent bills have brought more than a handful of stores to their knees, are being asked to share the pain. JJB's most recent restructuring and company voluntary agreements with landlords generated roles for a raft of firms including Herbert Smith, Norton Rose and Hogan Lovells, for example.

Advisers warn there is only so long the rescue deals can continue as any increases in interest rates are likely to bring things to a head on the high street – particularly as the next peak trading period for retailers is still nearly six months away. And where retail leads, other areas will follow. Already, behind the scenes restructuring partners are working on large numbers of deals in the property area, where sales of high-profile assets belie the underlying fact that there are huge portfolios on which banks are losing money where the individual assets won't sell.

Meanwhile, healthcare, which last month saw magic circle trio Freshfields Bruckhaus Deringer, Linklaters and Clifford Chance pick up work on one of the most high-profile – and controversial – restructurings in recent times, that of care home provider Southern Cross, is also expected to see a surge in activity.

So, while insolvency and restructuring work is still well below the levels predicted at the height of the financial crisis, advisers are now expecting another wave of mandates. As one partner comments: "We thought it was going to be Armageddon, but it wasn't because banks have saved people, but inflation is rising and there are lots of zombie companies that can't keep going. If retail is an indicator of what's likely to happen elsewhere, the omens are not looking good."