Credit funds raising billions in distressed plays

In the recent months, a growing number of new credit funds have started fundraising as investor appetite for distressed debt, CLOs and other niche special situations is on the rise. Pimco reportedly is raising up to $3 billion in a distressed assets, but is one of a long line of firms that have emerged from March’s market rout with cash in hand. A back of the envelop tally shows initially roughly $9 billion being gathered by an elite group of private debt players ready to be put to work in the space in the last few weeks. And it is likely the tip of the iceberg as the size of the space rapidly grows to exceed that at the height of the 2008 global financial crisis in a few short weeks. Highbridge Capital Management is said to be launching two funds for a total of $2.5 billion. The latest high-profile launch was for former Halcyon Capital Management shop Bardin Hill, which has raised $300 million so far for a opportunistic credit fund, which is slated to focus on distressed, stressed and special situations. The target size for the fund has not been disclosed. In 2018, Jason Dillow was named CEO of the firm as part of a succession plan in which the firm formed a strategic partnership with TPG Sixth Street Partners and announced additional investments from existing partners at Bardin Hill, Dyal Capital and the foundation of Halcyon founder Alan B. Slifka. But this is just the tip of the iceberg as various firms have begun fundraising in earnest despite the market dislocation Pennant Park, Greywolf Capital Management, Sculptor Capital Management, Varde Partners, Knightshead Capital and Silverback Asset Management have each begun raising money. As previously reported in Alternatives Watch, PennantPark Investment Advisers is raising $250 million to $1 billion for a broadly syndicated loan fund to capture discounted assets, according to market sources. The $3.8 billion firm based in New York has two main platforms – opportunistic and senior credit. Reportedly Greywolf Capital Management in Purchase, New York is seeking up to $400 million for a new distressed fund in a draw-down fund structure. The $3.8 billion firm is an active investor, regularly participating in bankruptcy processes and directing restructuring strategies at the board level, according to its website. Sculptor Capital Management, formerly Och Ziff, is said to be raising more than $1 billion. In the fourth quarter of 2019, Sculptor reported $790 million in inflows to its institutional credit strategies driven by the closing of a collateralized bond obligation and aircraft securitization. Its $15.7 billion institutional credit strategies portfolio had inflows of more than $2 billion in 2019. Varde Partners, meanwhile is said to be raising between $500 million and $1 billion in a new fund. At the end of 2019, the firm raised its 13th flagship vehicle, Varde Fund XIII with $2.47 billion in commitments. The fund trades across liquid traded credit, special situations, real estate and financial services. At that time, Ilfryn Carstairs, global co-chief investment officer of the $14 billion firm, said: “Against a backdrop of intense economic uncertainty, there are several significant pockets of distress around the world today, and we expect that opportunity to grow over the investment period of the fund. We have strategically built our right to play in markets where we can target the gaps left behind by traditional capital providers as they continue to retrench.”

Credit funds raising billions in distressed plays

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