NEW YORK, Feb 9 (Reuters) - U.S. hedge fund manager Aladdin Capital Holdings LLC said on Monday it had launched a fund that will invest in debtor-in-possession facilities, used to help companies survive the financial restructuring process, at a time when many DIP lenders have abandoned the field.
Aladdin says turmoil in the restructuring finance market amid a spike in corporate defaults has created “historic” investment opportunities. Many traditional DIP lenders, such as General Electric Co (GE.N), have sharply cut back or exited this business.
And with fewer lenders in the market, companies are paying interest rates that are three or four times higher than a year ago.
“This provides a tremendous opportunity to capture meaningful market share,” Neal Neilinger, vice chairman and chief investment officer of Aladdin, said in a statement. “The DIP fund will participate, structure and lend directly into both large-cap and mid-cap facilities.”
The prolonged credit crunch and recession have not only pushed more firms into bankruptcy, but have also choked off bank credit available to help companies get through the often-lengthy bankruptcy process.
Bankruptcy experts say U.S. companies are finding it almost impossible to get third-party DIP loans, forcing them to rely on their current lenders for financing to stay afloat. That said, FTI Consulting’s Dominic DiNapoli recently told Reuters he expects outside parties to again start offering DIP loans later this year.
Aladdin’s DIP fund will be jointly run by Victor Russo, a 22-year veteran of CIT Group (CIT.N), and Goldman Sachs Group’s (GS.N) Luke Gosselin. Russo most recently was president of CIT Business Credit. Gosselin, who previously worked with Russo at CIT, spent the past five years leading Goldman’s private principal finance business.
Stamford, Connecticut-based Aladdin specializes in nontraditional fixed-income strategies. (Editing by John Wallace)