(Bloomberg) — Victor Khosla, the founder of Strategic Value Partners LLC, is looking to hire amid one of the most promising environments for opportunistic credit investors in the last 10 years.
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“For investors like SVP, if you take out the first six months of Covid, there’s never been such a rich vein of opportunities over the last decade in an economy that’s not in a recession,” Khosla said in an interview.
Debt markets are facing a “reckoning” after a period of complacency, he said in a separate Bloomberg Television interview on Monday. The money manager is planning to hire in asset management to capitalize on the changing investing environment as the risk of trade wars spreads. SVP has already hired four more people in the US and Europe to focus on real estate, adding to the existing group of 12, as distress in office and multifamily units starts to surface.
In real estate, “there’s a massive cleaning up process taking place. People tend to give up the ghost at some point and foreclose and sell,” he said, adding that the firm may invest 25% of its funds into property for the next few years, compared with 10% to 20% traditionally.
SVP recently agreed to purchase a City of London office building at a discount of about 60% from the initial asking price and also acquired the Blanchardstown Centre, Ireland’s biggest shopping mall, in Dublin.
Khosla also sees opportunities beyond just real estate in Germany because its economy is near recession and interest rates remain much higher than during the easy money era.
About $6.3 billion of German corporate debt was distressed on March 21, an increase of $543 million from the previous week, according to data compiled by Bloomberg News. While optimism about the country’s economic outlook is improving amid a plan to spend more on defense, bankruptcies have been on the rise as higher borrowing and energy costs weigh on companies.
Investors who did deals there when interest rates were 0% are now seeing that “their chickens are coming home to roost,” Khosla said.
Chemicals, hit in recent years by higher energy prices, is an industry of interest, he said. The sector has about $6.8 billion of distressed corporate debt across the world at present, according to data compiled by Bloomberg News, down from about about $13 billion in January 2024 amid optimism that power costs could fall if there’s a ceasefire in Ukraine.
He also sees a strong pipeline of deals to loan junior financing to companies in European companies with debt warrants.
“European markets are more illiquid,” he said. “Capital is not so readily available as in the US. It’s much harder to get.”
Week In Review
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US President Donald Trump expanded a trade war after signing a proclamation for 25% fees on imported autos, a move that redounded across financial markets. In credit, the cost of guaranteeing US junk bonds against default reached their highest levels since December 2023. Yields drifted higher over the week. French auto supplier Forvia SE had to boost the yield on junk bonds it was selling, its first US dollar offering, to draw in sellers.
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But the market remained relatively orderly. US high-grade corporate bond sales for the week topped $41 billion, exceeding earlier dealer estimates of about $30 billion. T-Mobile US Inc. sold $3.5 billion of dollar bonds, while Dell International sold $4 billion of notes.
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A spate of big-ticket leveraged debt sales hit the market in the US and Europe, signaling the buyout market is tentatively kicking back into gear.
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Pacific Investment Management Co., AllianceBernstein Holding and TCW Group seized on a buying opportunity after recent market volatility forced multistrategy hedge funds to offload risky corporate bonds. Some such bets may have already started to pay off as prices on bonds for companies such as New Fortress Energy, Hertz Global Holdings and Outbrain rebounded as quickly as they plummeted in recent weeks.
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Bankrupt genetic testing firm 23andMe Holding Co. won permission from a judge to try to sell information about customers’ medical and ancestry-related data, a trove that is considered the most valuable asset in the insolvency case
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A plan is taking shape to put Hooters into bankruptcy and return control of the brand to the Florida businessmen who founded it decades ago. They aim to make it more family friendly to try to boost sales.
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Bausch Health Cos., the pharmaceutical and medical device company, shifted the mix of its $7.4 billion debt offering to put even more into bonds than loans, after being inundated with orders from supply-starved investors.
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Clearlake Capital Group has lined up $5.75 billion of debt financing to help pay for its planned acquisition of data and analytics provider Dun & Bradstreet Holdings Inc.
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Since Donald Trump’s return to the White House, US companies have all but abandoned the green bonds that were once touted as a way for corporate America to have a hand in fixing the planet.
On the Move
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Dominic Ashcroft, head of leveraged finance for Europe, the Middle East and Africa at Goldman Sachs Group, is leaving to join Blackstone in one of the most high-profile switches to date of a banker from Wall Street to a private credit firm.
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John Aylward’s Sona Asset Management hired two senior managers for its investment team as the credit firm continues its global expansion. Craig Nicol will join as a managing director and head of credit strategy in London and Oleg Melentyev will be director of US credit strategy in the firm’s New York office.
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Morgan Stanley’s head of North American leveraged-finance trading, Nick Brice, has left the firm, according to a person with knowledge. His responsibilities will be absorbed by others in the group.
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Northern Trust Asset Management’s head of capital structure, Eric Williams, is planning to leave the firm, according to people familiar with the matter. Williams has also served as a senior portfolio manager on the global fixed income team.
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BlackRock Inc.’s head of Asia Pacific private credit Celia Yan is leaving the firm for Apollo Global Management, where she will lead the firm’s hybrid efforts in Asia Pacific.
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HSBC credit analyst Derek Lin is leaving the company to join a US bank in June.
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Bank of America Corp. has named Paul Ciana as head of Fixed Income Currencies and Commodities (FICC) and Equity Technical Research.
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S&P Global says Ian P. Livingston has been elected as Non-Executive Chairman of board, effective May 7, and Richard E. Thornburgh will retire when his current term expires in May.
–With assistance from Jaren Kerr.
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