Oaktree just raised the biggest distressed-debt fund ever—$16 billion. That’s even bigger than their last one, which was $15.9B. They’re saying the money will go toward struggling companies in different industries, but I’m wondering what this actually means.
Are they just looking to buy up companies on the cheap, or is this more about helping businesses survive? Curious what you all think.
Distressed debt is basically just buying companies that are struggling, right? So they just wait for a downturn and swoop in?
Zen said:
Distressed debt is basically just buying companies that are struggling, right? So they just wait for a downturn and swoop in?
Pretty much. They buy debt for pennies on the dollar and then either restructure the company or sell off assets to make a profit.
Feels like private equity but with extra steps. They get control of companies without actually buying them outright.
Oren said:
Feels like private equity but with extra steps. They get control of companies without actually buying them outright.
Yeah, but sometimes they do help companies survive. If a business is drowning in debt but still has potential, they step in and restructure it instead of letting it go bankrupt.
Does this mean they think a recession is coming? Why raise this much money now?
Fitz said:
Does this mean they think a recession is coming? Why raise this much money now?
Good question. Usually, these funds go big when they see trouble ahead. Could be they’re expecting a lot of companies to run into problems soon.
Oaktree has been doing this for years. They love bad economies because that’s when they can make the most money.
Avery said:
Oaktree has been doing this for years. They love bad economies because that’s when they can make the most money.
That’s how distressed-debt investing works. It’s all about buying low when companies are desperate and selling high later.
So is this a good thing or a bad thing? Are they saving companies or just profiting off their struggles?
Pax said:
So is this a good thing or a bad thing? Are they saving companies or just profiting off their struggles?
Depends on how you look at it. Some businesses get a second chance, but others just get stripped for parts.