Many private equity firms are gearing up for a move into distressed investing, while veterans of the sector have been bracing for a flood of opportunities. But some firms are firmly holding onto their dry powder as they try to identify the bottom of the downturn and avoid catching falling knifes.
There have already been some disastrous distressed investment bets. TPG, for example, lost more than $1 billion on its gamble on Washington Mutual when it was seized by US authorities, while Cerberus Capital Management’s investments in Chrysler and GMAC have seemingly backfired.
A panel at PEI Media’s CFOs and COOs forum in New York explored the topic of private equity firms diving into distressed investing.
Click below to hear excerpts of the discussion by three private equity CFOs – Ken Warren of Littlejohn & Company, Jay Corrigan of Bain Capital, Jeffrey Hahn of Morgan Stanley Capital Partners and Morgan Stanley Infrastructure Partners – and Prakash Mehta, co-head of the investment funds and private equity group at law firm Akin Gump Strauss Hauer & Feld.