Alternative investment firms to the rescue

Date: Wednesday, February 18, 2009
Author: Special Comment

As governments around the world are recapitalising their countries' financial institutions, hedge fund managers and private equity firms are planning their own rescue operations. One example is Countrywide, the UK's largest real estate agent, which is getting a cash injection from a consortium of alternative investment firms.

Oaktree, a specialist US distressed fund manager, is reported to be on the verge of signing a deal to acquire 35 per cent of Countrywide, which is currently owned by US private equity firm Apollo Management for GBP1bn.

The cash injection is part of a restructuring deal that will cut the debt burden of the business from about GBP750m to GBP175m. Apollo will retain a stake of about 30 per cent in the business with UK private equity firm Alchemy Partners and Polygon, a US hedge fund manager, also holding equity.

This deal, which requires the approval of 75 per cent of Countrywide's bondholders under a scheme of arrangement, could herald a trend of hedge fund and private equity managers taking over companies by acquiring their debt.

The Oaktree consortium is reportedly investing around GBP75m of fresh equity into Countrywide. With hedge fund managers increasingly focusing on distressed debt opportunities and private equity firms anxious to deploy their dry powder, other similar deals could be on the way.