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Distressed Investors with Dry Powder


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Does anyone have any ideas of distressed/spec sit investors with alot of dry powder & public vehicles to invest in?  The two I can think of are Equity Commonwealth (Zell) w $3.3 billion cash & TSLX w $1.0 billion dry powder.

 

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if we can count BDC's I'd say Oaktree Specialty Lending is under-levered relative to competition and could be considered more ready than others to pounce, but deciding who gets the best opportunities amongst the OAK/BAM tree may be difficult. Obviously tons of PE / Credit firms have a lot of uncalled commitments, but that's not what you are referring to.

 

I'd be careful with EQC at these prices, particularly in a taxable account. it's at $4.1-2 billion w/ $3.3 billion of cash and ~$700 million (at full valuations) of buildings, so it's about 105% of NAV, but you have big special divvies due to shareholders because of big taxable gains this year on sales. So about $400 million (I believe and possibly more if the remaining buildings are liquidated) needs to make it to shareholders pockets before January 2021 (per the most recent call).

 

So you want to own EQC in a tax-advantaged account and you want to be mindful that it's a partial forced tax related liquidation. at 90% of NAV (it got to like 85% in the most recent turmoil, offering great risk adjusted returns, but high opportunity costs given the state of other securities at the time) that's great. At 105% of NAV, that can bite you in the ass a little and increase your effective multiple paid for the call option on Sam Zell and team's brain.

 

Buying EQC is like buying a distressed fund where they call all your capital upfront and then may or may not do anything with it. I owned it for 6-7 years (as chronicled in the thread) and made a safe mid-high single digit compounded, but I think you have to be very price sensitive about it given the tight NAV range. Of course if they do an awesome deal, it won't matter whether you paid 95% or 105% of NAV. But that would imply that the market will immediately give them credit for the deal's awesomeness. you may have time to buy w/o paying much more [maybe even less] after deal announce or you may not.

 

 

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I dunno if you'd consider them distressed, though they have been involved with turnarounds (like Fiat's buyout of Chrysler).

 

Exor is still expecting to close on the sale of their insurance unit which will give them $9 billion in cash which is a massive chunk of their current market cap.

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Thanks for ideas.  I looked at Oaktree also but had the same conclusion as you - how do I know they will get the best of fair deals?  They also have a relatively high expenses (48% of NII) vs 35% for TSLX & TSLX has first dibs on any deal originated by 6th Streets US Debt origination group.

 

TCP was also interesting due to its lower costs & decent historic track record.  There range of products appears to be narrower than TSLX (which has made retail ABR loans, DIP loans & tech loans)

 

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