illiquid structured credit opportunities
Hi,
I was looking at a fund which invests in illiquid structured credit opportunities. Apparently what they do they is buying the debt of private companies, but not entirely sure. (they also invest in distressed assets/RE)
1) Could someone please explain if my understanding of what illiquid structured credit opportunities are is correct?
2) How is the day to day work? in what does it consist?
3) what is the difference between investing in the debt of private companies vs investing in NPLs? Do they overlap?
Thanks a lot
Doesn't necessarily refer to just corporate debt of private companies. Can also be structured financing of non-performing bank loans, random receivables, mortgages, royalties, credit cards, personal loans, equipment leases, insurance products, etc...
Almost anything that generates a cash flow can be levered to alter its risk / reward and generate the low-teens to 20+% IRRs these funds target.
This
This would be the equivalent to KKR’s “newer” strat. Their Asset-based finance team. OP should look this up if he’d like to learn more about them.
Thank you! When you buy debt from a company what do you do with it afterwards ?
Hyperventilate
Good 1st comment. Just to add: main difference is investing in corporates means analyzing business models, competitors, financials and also know how to monetize in a downside esp in special sits (eg restructuring in various jurisdictions etc). Investing in NPLs, credit cards, etc is normally called ABS and is different because you don't DD a company but a pool of assets. Your downside is selling the assets.
Thank you! I was also wondering what the process is after you buy the debit of a private company? Who do you sell it too and how do you monetise it?
You can hold it and earn the interest payments until it the assets in the pool mature. Or, you can securitize the portfolio (or as someone mentioned earlier, use a debt facility to add leverage) while you hold the first loss tranche & increase your IRRs.
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