The $8.3 billion firm Monarch Alternative Capital announced the final close of its Monarch Capital Partners V, which attracted $3 billion for investment in distressed and opportunistic credit.
Launched just before the COVID-19 pandemic, officials expected a growing pipeline of investments given the evolution of Monarch’s closed-end funds previously. The fund started to put capital to work upon the first close in May and has been actively deploying capital since.
“COVID-19 created clear disruption across the global economy, which translated into an unprecedented amount of opportunities in our space,” commented Michael Weinstock, CEO of Monarch Alternative Capital. “While we don’t know how this all ends, the ongoing uncertainty around the new ‘normal’ will keep us quite busy for a long time.”
The Monarch team has invested through multiple distressed cycles and the latest fund focuses on investments in the top of a capital structure with a focus on event-driven situations where Monarch can take a leadership role in the process.
Through October, the fund has deployed $1.1 billion of capital across 38 different investments. Firm-wide, Monarch has invested over $3.5 billion into the distressed asset class, the most capital the firm has deployed in a year since 2008.
The current opportunistic focus spans five verticals within distressed: corporate credit, structured credit, real estate, government debt and special situations. Officials added that the opportunities are within mid-market corporate credit, as shutdowns, decreased revenue and high leverage have left companies with limited options other than to restructure. Compounding problems are that smaller companies and lower-rated issuers are generally not benefiting from federal intervention that has supported larger borrowers, investment grade and higher quality high yield instruments.
The environment is also conducive to Monarch’s portfolio in structured credit, particularly in commercial mortgage-backed securities and aircraft securitizations, officials said.