Distressed debt firm Strategic Value Partners raises $2.85bn

Tuesday 08th May 2018 13:31 EDT
 

One of Wall Street's “distressed debt” specialists, Strategic Value Partners (SVP) raised almost $3 billion for a new fund as some investors grew more nervous about the scale of corporate indebtedness and effect of rising interest rates. Demand for the new fund surpassed SVP's expectations and, at $2.85 billion, was twice the size of its last vehicle. Distressed debt investors usually jump on the loans and bonds of troubled borrowers, either betting that prices have fallen too far, or trying to take over ownership through a restructuring process.

Data and intelligence source Preqin said, “Investors across different asset classes increasingly feel that public markets are at or close to a peak, and may be due for a correction.” It added, “In this context, the appeal of higher-risk strategies like distressed debt and special situations is growing... This may be why we have seen distressed debt overtake direct lending as the most sought-after strategy.” SVP founder Victor Khosla stressed that its fourth fund was not linked to expectations that a downturn is looming for corporate debt, but as a “vote of confidence” in the company's results.

“We invest across cycles. We tend to lean in after a crash, but we try to invest fairly steadily. People have been calling for another downturn since 2009, but it doesn't feel like the economy is going to turn over this year or even 2019,” he said.


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