Friday, April 8, 2011

Europe’s $2 Trillion of Distressed Debt Set to Outstrip U.S.

The distressed debt market in Europe is set to outstrip the U.S. for the first time as the region’s sovereign crisis forces banks to sell $2 trillion of underperforming assets, Strategic Value Partners LLC said.

“The opportunity set in Europe is very attractive and rich,” said Victor Khosla, founder of the Greenwich, Connecticut-based distressed-debt hedge fund manager, said in a phone interview. “It far exceeds the U.S. for the first time.”

Strategic Value Partners, which oversees $4 billion, is among hedge funds eyeing Europe as the fallout from the credit crisis and governments’ austerity measures trigger fire sales. Mark Unferth, head of distressed debt at London-based CQS U.K. LLP, is boosting investment in Europe and expects rivals to do the same, he said in an April 6 interview. New York-based KKR & Co. said March 1 it hired Mubashir Mukadam to head its push into the European market.

By comparison, U.S. banks have announced they need to sell $800 billion of assets since the credit crisis, Strategic Value Partners calculations show. (read more)