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Following record high yield issuance earlier this year, primarily due to leveraged buyouts (LBOs), the high yield market has experienced a liquidity crisis since July after news stemming from the sub-prime sector and the meltdown of the Bear Stearns hedge funds. With nearly $2 billion exiting mutual funds during June and July, the market experienced its most significant back-to-back month of outflows since October 2005. Now, much of this debt is trading at significant discounts, offering yields in some cases of between 15-20%. Simran Capital has been buying.
“The record level of LBOs in recent periods was backed by record inflows of cash into private equity funds with long lock ups, much of which is still sitting in cash. We believe these private equity firms are not about to lose their equity interests as a result of over-leveraging and could support many of these structures with additional cash infusions if needed,” says Tandon. “It is a rare event when we see a private equity firm write their investment to zero and walk away.”
Simran Capital Management, a pre-event driven activist hedge fund manager that focuses on stressed and distressed credit markets seeks to profit from the current depressed debt markets. “We see increased opportunities for our unique ‘Pre-Event’ driven strategy in this type of market,” says Mesh Tandon, President of Simran Capital. The Simran team seeks to engage management of credit issuers and work within the capital structure to e...................... To view our full article Click here
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