Third Avenue Management LLC, founded by longtime distressed debt specialist and activist investor Marty Whitman, will join the increasing ranks of investors launching private equity funds targeting distressed companies. The firm is planning to raise a $3 billion private equity fund keying in on distressed securities, according to a Tuesday
Wall Street Journal report. A Third Avenue spokesman declined to comment.
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David Barse, Third Avenue's president and CEO, told the Journal that the fund, which is likely to be operational by the first quarter of 2009, will seek control in the restructuring or reorganization of the debt of its targeted companies.
The distressed ring has drawn a crowd of late with distressed funds raising 38% more capital globally in the first half of 2008, compared with a 21% decline in buyout fundraising, according to Private Equity Intelligience Inc. The three largest funds raised so far in 2008 include the $15 billion Warburg Pincus Private Equity X, Goldman Sachs Private Equity Group's $13 billion GS Mezzanine Partners V and Oaktree Capital Management's $10.9 billion distressed fund, OCM Opportunities Fund VIIB.
Third Avenue is no stranger to distressed investing. One of its more notable distressed buys involved the partnering with Eddie Lampert of ESL Investments Inc. to buy up $140 million of Kmart Corp.'s debt prior to its mid-2003 emergence from Chapter 11. More recently, Whitman has taken aim at financial services companies battered by the credit crisis, taking a nearly 11% stake in mortgage insurer Radian Group Inc. in September 2007, which it since upped to 18.8%, making it the company's largest shareholder, and holding a 16.5% stake in bond insurer MBIA Inc., making it its second-largest shareholder behind Warburg Pincus LLC. - Michael Rudnick
