Regardless of the improving economy, buyout firms large and small continue to see opportunities to invest in distress. Investing pros at the Buyouts New York conference last month aired a variety of strategies, from conventional operational turnarounds to distressed-debt investing and deleveraging plays.
This even as distress, by conventional measures, seems to be at an historic low. Standard & Poor’s Leveraged Commentary and Data reported in May that leveraged loan defaults hit a 38-month low in April, falling below 1 percent. Edward I. Altman, a noted expert in credit risk at New York University, predicted in February that the corporate debt default rate would be just 2.8 percent for all of 2011.
“There is no cyclicality to stupidity,” declared Richard Maybaum, managing director at
And while economic conditions look bright for large-cap companies that have access to publicly traded credit markets, it is a different story with smaller firms, where Littlejohn does extensive scouting to ferret out opportunities. “The lower middle market is still broken,” Maybaum said. “The capital markets are not there for them, so they can’t kick the can down the road. And there are a lot of cans.”
Rick Schifter, a partner at
Josh Harris, a managing partner at the mega-firm
Others take an operational approach. David Shapiro, co-founder and managing partner of
Later that year the firm added the Labatt USA brand in a carveout from Anheuser-Busch InBev and has followed on with deals for brands such as Magic Hat, Pyramid and other craft beers. In the process, the firm added 300 jobs to the company, modernized the plant in Rochester and built a brewing community, Shapiro said. “We thought it was an interesting opportunity. And once we did something interesting, there was going to be a real opportunity to add on.”