That’s setting up a favourable investing environment for KKR’s special-situations team, Jamie Weinstein, global co-head of special situations at KKR, told Bloomberg TV Monday.
He said that lending mistakes are being made in the low interest rate environment, and that his team is poised to take advantage of the “bad side of the credit cycle.”
In April, KKR closed a $3.35 billion global fund that focuses on companies in trouble or undergoing restructurings.
Here is Weinstein (emphasis ours):
“In an environment where you have endless amounts of quantitative easing, and you have a flow of capital through financial markets into fixed income and credit in the search for yield, you end up with marginal credit decisions that get made. And it’s very difficult for somebody like us who is more opportunistic to be effective in that environment. When you have the tide roll out, and the last couple of days certainly looks just the beginning of the tide rolling out, it could quickly turn the other way and be an opportunity.“
While the majority of recent bond defaults have been in the oil and gas sector, Weinstein said the sector isn’t distressed enough to put money to work.
The retail sector, however, presents an interesting opportunity. He cited high-profile bankruptcies like those of Sports Authority and Radio Shack as an indicator of the changing retail industry.
The team evaluates a company by its positioning, store footprint, earning power, and how easily they can be replaced by online competitors, Weinstein said. Those that could create a reason for shoppers to visit the store for something unique have the potential to survive, while those carrying products that are totally commoditized will likey end up in trouble.
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