In the Financial Times article “Private equity savours winter of discount debt”, Joseph Cotterill describes how Private Equity firms are taking advantage of the current freeze in high- yield bond markets. Especially in US energy, metals and mining markets, spreads and defaults have jumped to record highs. Where public markets fear to tread, PE funds exploit the distressed debt strategy by buying distressed corporate bonds in search of double-digit returns. Apollo for example, has doubled its investments in distressed debt over the 3th and 4th quarter of 2015.
Oaktree’s co-chairman Howard Marks told the Financial Times that it’s time to move forward with the strategy especially because optimism and liquidity in credit markets, which are the enemies of a distressed-debt strategy, have faded.
Stephen Schwarzman, chairman of Blackstone, was even less subtle in his statement, describing the current situation as “nirvana.”