Wednesday, 19 November 2014

Another US 'vulture' fund circles Stemcor

Here is an interesting snippet I picked up the Stemcor restructuring situation I wrote about in The Sunday Times last weekend.

I hear from good sources that Monarch Alternative Capital, a US fund that specialises in buying distressed loans (also dubbed by some news outlets as a 'vulture' fund), has built up a sizeable position in Stemcor's debt.

However, it's not clear why Monarch has snapped up Stemcor's debt. Often these types of funds have two motives when taking positions in ailing companies' debt: either they believe the debt is cheap (i.e. it's just a trading opportunity); or they are looking to become shareholders via a restructuring that results in a debt-for-equity swap.

Monarch - which has about £3.5 billion under management and is run by former Lazard banker Michael Weinstock - knows the UK well. It has been operating in Europe for about twenty years and opened a new office in Mayfair, London in 2013.

The fund hit the headlines in Blighty after it participated in the restructuring of the Co-Op Bank and became one of the lenders biggest shareholders when it went through a massive restructuring this time last year.

Here is quite a good summary of Monarch from an old colleague and excellent hack, James "Quinny" Quinn;

Monarch's interest in Stemcor's debt comes after Apollo, a rival US debt fund, bought into Stemcor's loans. Apollo is run by legendary Wall Street rainmaker Leon Black.  

It will be interesting to see what Monarch and Apollo's plans are for Stemcor...

Or, perhaps they believe the company is on the verge of turning itself around and Stemcor's debt is good value?

Monarch and Stemcor both declined to comment.

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