Special situations are the new credit derivatives

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In 2005 and 2006 there was big growth in credit derivatives teams. In 2009 there is biggish growth in special situations/workout teams.

According to Moody's, European defaults last year were the second highest on record. Also according to Moody's, defaults on speculative-grade loans will peak at a record 16% in 2010.

Little surprise, therefore, that people who can help restructure bad loans and recover some of their value are now highly popular.

The big British clearing banks (AKA Lloyds and RBS) have some of the biggest loan workout teams, and are understood to have been adding to them. However, investment banks have also been taking more of an interest than they used to.

"Workout is becoming a lot more front office and is being tied in more closely with corporate finance and restructuring advisory," says Lee Thacker at Silvermine Partners.

Paul Hunt, managing director of Healy Hunt, says most banks are growing their existing teams and that tier two and tier three banks are setting up entirely new ones.

Sadly however, expansion is driven by internal moves rather than external hires. "The core component of workout teams is generally people taken from the front office and put into middle office workout roles," says Hunt. "They may then be complemented with hires from the Big Four," he adds.

This is a shame as workout pays quite well. Hunt says 200k plus is not unheard of.