Telegraph.co.uk – Industry sources say private equity and distressed debt specialists have raised about $26bn (£17bn) since the start of October, with some 80pc coming from hedge funds. <\/p>\n
Distressed debt funds, which buy debt that is trading at a discount because the borrower is at risk of defaulting, have been around for years but specialists are looking forward to a bonanza year in 2009. <\/p>\n
Among the biggest distressed debt fund raisings since October have been Oaktree, which has secured $10.5bn, Towerbrook with $2.75bn, Intermediate Capital with $1.5bn, and Alchemy with $1bn. Hedge funds are also aiming to buy distressed debt directly from banks that are under pressure to offload liabilities to shore up their balance sheets. <\/p>\n
Secondary debt, even senior loan notes, often trade below 70p in the pound and yield 25pc over five years if the debt is held – and survives – to maturity. If a company is strugglings with its covenants, debt holders can strike debt-for-equity swaps in return for keeping a company afloat – often a cost effective way of getting a seat at the table or control of a business.<\/a><\/p>\n