Reuters – HSBC Halbis Partners has this month launched a distressed debt hedge fund to exploit opportunities thrown up by an expected rise in corporate default rates this year.<\/p>\n
Analysts say the launch is probably the start of a trend to meet growing investor demand for distressed debt managers over coming months as economic growth slows, creating a tougher trading environment for many companies.<\/p>\n
“The default rate in the distressed market troughed in 2005 and in December alone we saw a $9 billion (5 billion pound) spike in new supply,” the fund’s manager Kim Golden said in a release.<\/p>\n
“Through the remainder of 2006 the default rate should continue to trend up and we are ready to be opportunistic.”<\/p>\n
Defaults hit an 8-year low in 2005, according to Standard & Poor’s, with just 37 S&P-rated firms defaulting on their debts.<\/p>\n
However, a spate of high-profile defaults in the second half of the year pushed the total amount of debt affected to $42.5 billion, the largest volume since 2003, and S&P said it expected the global default rate to “edge up” in 2006.<\/p>\n