Distressed bond investor Oaktree Capital Management co-founder Howard Marks sees one of the biggest opportunities since the global financial crisis. Rising interest rates and the approaching recession are driving more and more companies into trouble.
Oaktree, which has made “middling” returns in recent years in an easy-to-raise environment, is seeing opportunities to fund companies struggling to service their debts. The company has about $163 billion in assets under management (about 22.9 trillion yen).
“Our opportunity is coming again,” Marks told investors in Singapore this week, and made similar remarks in a later Bloomberg News interview.
Inflation in the US has likely peaked, but interest rates will remain around 5% for the next five to 10 years, Marks said. Many companies will find themselves in a “serious situation” as consumer attitudes change and financial burdens increase, she said.
“A year ago, people thought the outlook was totally clear,” but now I think we’re reaching a point where investors “think it’s dead. It’s an opportunity to buy cheap and lend safely at high yield,” he said.
Marks said losses suffered by banks in bridging loan deals are hurting the credit market, citing the deal involving Elon Musk’s takeover of Twitter as an example. Wall Street banks arranged about $13 billion in leveraged buyout (LBO) financing to help buy Mr. Musk, but the bond sale didn’t go as planned, prompting banks to sell as much as 70 cents . he reported that he is offering discounts.
Loan applications on Twitter, the fund is asking for a steep discount for bank applications
“You can imagine the extent of this loss,” Marks said.
news-rsf-original-reference paywall">Original title:Oaktree’s Marks sees “big deals” on the way as recession looms(extract)
