(Bloomberg) -- Greywolf Capital Management is seeking as much as $400 million for a new distressed fund, the latest in a wave of firms maneuvering to capitalize on the surge in troubled credit fueled by the coronavirus pandemic.
Greywolf started talking to investors last month for the draw-down fund, which would call capital as it finds one-off investment opportunities, according to a person with knowledge of the matter who asked not to be identified because the information isn't public. The fund will focus on investments mainly in North America, followed by those in Europe and South America. It is evaluating opportunities across industries, including those hit by the market turmoil such as the oil and gas, airline, leisure and hotel sectors.
A spokesman for the Purchase, New York-based firm declined to comment.
“We anticipate that 2020 will present the most lucrative distressed debt investment environment since the great financial crisis and we are fully prepared for it,” Greywolf wrote in a market update, dated March 31. “We have an extensive shopping list of names to buy opportunistically and we expect that list to continue growing.”
Greywolf joins a slew of investment firms that are raising fresh cash to buy debt cheapened by the market's recent decline. Varde Partners, Sculptor Capital Management Inc. and Highbridge Capital Management are among those that have been seeking money to take advantage of the dislocations.
Funds like Greywolf's are seizing on the surge in distressed securities after years of easy lending and low interest rates made potential targets scarce. The amount of distressed debt in the U.S. quadrupled in less than a week last month to almost $1 trillion. Distressed debt describes the borrowings of companies perceived to be under significant financial pressure, and often suggests there's considerable risk that the debt holders won't get paid everything they're owed.
Read more: Prices Gone Haywire Attract Billions to Dislocated-Debt Funds
“The rapid and record‐breaking sell-off that began in early March was initially a warranted re‐underwriting of credit risk in light of Covid‐19's impact on expected cash flows, but it quickly became a liquidity contagion,” according to the Greywolf update. “In our view, fund redemptions begot forced selling, eventually leading to waves of margin calls and dislocations across not just high yield and leverage loans but also markets including Treasuries, agency MBS, commercial paper, asset‐backed securities and structured products.”
Founded in 2003, Greywolf has about $3.8 billion in assets under management across distressed, event-driven and credit strategies. The firm's founders, Jonathan Savitz and James Gillespie, previously worked at Goldman Sachs Group Inc.
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