Canadian pension PSP hires debt pro ahead of turn in cycle

  • PSP is expanding its distressed investing capabilities ahead of a turn in the cycle
  • Francis Blair previously handled large distressed investments at Solus Alternative Asset Management
  • PSP’s debt group will also make direct investments and co-investments

Public Sector Pension Investment Board hired Francis Blair, former managing director at Solus Alternative Asset Management, beefing up its ability to invest in distressed debt and rescue finance.

The $119 billion Canadian retirement system is expanding its capabilities ahead of a turn in the cycle, said Jeffrey Rowbottom, managing director for principal debt and credit investments at PSP Investments USA.

“Hiring Fran Blair allows us the capability to do some select distressed investing ourselves and/or to partner with other firms that specialize in this,” Rowbottom said in an interview.

“We will still continue to give money to funds that actively invest in distressed debt day in and day out.”

Blair, 42, was named managing director, distressed credit investment and rescue finance, at PSP.

He will join the pension system’s New York-based private-debt group and help expand PSP’s debt-financing capability to include special situations. The group will make direct and co-investments in distressed-debt opportunities, Rowbottom said.

At Solus, Blair worked on some of the company’s largest distressed investments, including the successful restructuring and $6 billion sale of ITR Concession Co, operator of the Indiana Toll Road, according to PSP.

Preempting the cycle

PSP expects to see more distress opportunities, Rowbottom said.

“We think there is going to be increased need for this type of investment, and it will require specialized expertise,” Rowbottom said.

“When a cycle does hit, there will be a lot of opportunities, and it would be a tough time to try to get started and try to hire people, so we want to get out ahead of it.”

PSP plans to extend financing that will solve problems for distressed companies, rather than just taking advantage of their predicaments. Unlike firms that do a lot of trading, PSP can be more long-term and deliberative, Rowbottom said.

A distressed-debt fund might have a five-year term or might require more liquidity. But PSP doesn’t have those constraints and it can take advantage of its “patient capital” to facilitate a turnaround, he added.

“The types of transactions that we’re likely to do will be less frequent, more negotiated,” Rowbottom said. “We’ll be putting money to work for a longer period of time, and doing more private equity-type diligence.”

PSP’s relationships with private equity firms — which it has built up as a limited partner in their funds — as well as with other investors will allow for more effective distressed and rescue financing investment of highly leveraged companies, Rowbottom said.

“That’s a natural place for us where we have existing relationships,” he said.

PSP’s private-debt offerings include providing leveraged credit, high-yield bonds, and loans for companies that are below investment grade credit.

“We’re a go-to provider for bespoke preferred equity,” Rowbottom said. “It’s not a vanilla product — each one is highly customized. We want to be a solutions-oriented partner.”

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