“Capitalism without bankruptcy is like Catholicism without Hell”: These distressed-debt players are ready for a feast

A look at who's raising billions of dollars to target troubled deals and companies

TRD NATIONAL /
Apr.April 20, 2020 04:00 PM
Oaktree co-founder and co-chairman Howard Marks (Credit: Marks by K. Y. Cheng/South China Morning Post via Getty Images)

Oaktree co-founder and co-chairman Howard Marks (Credit: Marks by K. Y. Cheng/South China Morning Post via Getty Images)

“The firewood had been stacked,” Oaktree Capital Management said in a recent presentation to investors. And the coronavirus pandemic was the igniter.

Companies had been levering up and it is time to take advantage of the situation, Oaktree said in its presentation, which was viewed by Bloomberg. Oaktree, which is majority-owned by Brookfield Asset Management, is looking to raise $15 billion to start a distressed-debt fund, the biggest of its kind.

Oaktree, which Brookfield paid $4.8 billion for a 61 percent stake last year in an effort to challenge Blackstone Group, believes that even more distressed deals are ripe for the picking than during the 2008 financial crisis. The bets will be spread across a variety of industries, but Oaktree has experience with real estate deals. In 2016, it teamed up with JPMorgan Chase to lend Ziel Feldman’s HFZ Capital Group $500 million to refinance four New York City condominium buildings.

Though Oaktree is making the largest bet on distressed debt, it’s far from the only player gearing up for action. Pacific Investment Management Co. (PIMCO), a subsidiary of European financial-services giant Allianz, is looking to raise at least $3 billion for a new distressed-assets fund, and Cerberus is looking to quadruple the size of its new stressed and distressed credit fund to $750 million, Bloomberg reported.

In July, Bain Capital teamed up with Manhattan-based SKW Funding to target $500 million in troubled real estate debt. At the time, the fundraising market for distressed debt was lackluster, totaling just $2.5 billion for the first five months of 2019, according to Preqin, and a far cry from the $45 billion raised in 2008. But the situation has certainly changed since then.

Howard Marks, the billionaire co-founder and co-chairman of Oaktree, penned one of his fabled memos to his investors on April 14, sharing his thoughts on the pandemic and the opportunities it has created, and criticized the government’s attempt to bail out troubled businesses by buying their debt.

“There’s an old saying — variously attributed — to the effect that ‘capitalism without bankruptcy is like Catholicism without Hell,’” Marks wrote. “It appeals to me strongly. Markets work best when participants have a healthy fear of loss. It shouldn’t be the role of the Fed or the government to eradicate it.”

Write to Hiten Samtani at [email protected] 


Related Articles

arrow_forward_ios
 Rendering of Father Marquess-Barry Apartments with Matt Rieger

HTG scores financing for senior affordable housing in Overtown

HTG scores financing for senior affordable housing in Overtown
Fortune International Group’s Edgardo Defortuna, Château Group’s Manuel Grosskopf and a rendering of the project

Fortune and Château score $119M refi for Sunny Isles condo project

Fortune and Château score $119M refi for Sunny Isles condo project
Rendering of the project and from left: Vince Signorello, Ricardo Caporal and Greg West

Zom Living, partners score $57M loan for Ludlam Trail project

Zom Living, partners score $57M loan for Ludlam Trail project
6405 West Boynton Beach Boulevard rendering, Pebb Enterprises President and CEO Ian Weiner

Sprouts-anchored mixed-use project in Boynton Beach scores $27M loan

Sprouts-anchored mixed-use project in Boynton Beach scores $27M loan
Shoma Group CEO Masoud Shojaee and a rendering of Ten30 South Beach

Shoma nabs $18M construction loan for condos near Lincoln Road

Shoma nabs $18M construction loan for condos near Lincoln Road
Rendering of Wynwood 28 and Laurent Morali 

Kushner lands $18M loan for Wynwood projects

Kushner lands $18M loan for Wynwood projects
Matt Rieger and a rendering of Paradise Lake Apartments

Developer scores financing for West Kendall affordable housing project

Developer scores financing for West Kendall affordable housing project
Wynwood 25 and Wynwood Annex with Jon Paul Perez and Jonathon Yormak (Credit: East End Capital/Related Group)

Related, East End score $136M refi of Wynwood projects

Related, East End score $136M refi of Wynwood projects
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...