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The Friday afternoon panel at Columbia Business School's 14th Annual Private Equity and Venture Capital Conference discussed the state of the distressed investing market.
Glenn R. August, the president of Oak Hill Advisors, said: "I think there's reason to be concerned and reason to be excited about distressed investing. The housing market is in trouble, and the financial structure is going through a period of distress. "If there is a recession, there's going to be significant distressed opportunities," he continued. "We're likely to see some continuing weakness; the question is will we see forced selling?" George J. Schultze, a managing member of Schultze Asset Management, thinks that things haven't yet hit bottom. "You're not going to make money buying debt at 80 cents on the dollars. You have to wait even longer until it gets even cheaper." Oaktree Capital chairman Howard Marks said that the best returns will come from picking up assets on the way down. "You have to buy when people are petrified. The deals that produce the biggest returns are when you catch the falling knife," said Marks. "And the other thing is that it's important to be right," he said to laughter from the audience." Richard Maybaum, a managing director at Cetus Capital, said that leverage multiples on many companies are high enough that "it doesn't even take a recession; it just takes a little slower growth to affect these companies." August agreed, saying "balance sheets are not in good shape. They have an enormous amount of leverage. Right now there's plenty of debt trading at 50 to 60 cents on the dollar because of the risk investors are taking." Companies with leverage at "13 times Ebitda is not sustainable whether or not it's covenant-lite," Schultze added. "Risk is spread out all over the world, so it remains to be seen what the impact will be." - George White Columbia PE & VC Conference: Putting best foot forwardColumbia PE & VC Conference: LPs in tightening credit market Columbia PE & VC Conference: Africa could be home to more investment See Columbia Business School PE & VC Conference schedule Categories Deal Video
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