Private Equity News & Analysis

Patterson compares current volatility to Great Depression

MatlinPatterson co-founder Mark Patterson yesterday characterised today's economy as the most troubled since the period following the US stock market crash in 1929. Operational concerns are now second to broader financial markets considerations when conducting due diligence, he said.

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The troubles in today’s financial markets may have the US headed for a recession, said Mark Patterson, co-founder of New York private equity firm MatlinPatterson, placing the chances at approximately one in four.

According to Patterson, the financial markets are more troubled than any time since 1929 when the US stock market crashed, initiating the Great Depression.

Mark Patterson

In conducting due diligence today on potential portfolio investments, operational concerns have become secondary to concerns over the financial markets, Patterson said yesterday in a conference in New York.

“It’s certainly the toughest [market] that any of us have ever seen,” said Sun Capital Partners co-chief executive Rodger Krouse, speaking on the same panel.

There is a currently a large supply of distressed investment opportunities in the market, agreed Krouse and Patterson.

However, investors need to focus on whether there is sufficient consumer demand to keep the company alive through the investment cycle, said Patterson, who predicted two to three years before stability returns to the markets.

Founded by Credit Suisse First Boston alumni Patterson and David Matlin, the firm has $9 billion (€6.4 billion) under management between its private equity and hedge fund platforms.

In June, MatlinPatterson added to its collection of air cargo companies with the purchase of an 85 percent stake in Arrow Air for an undisclosed amount. In May, the firm agreed a rescue financing package worth more than $510 million with Standard Pacific, a 42-year-old US homebuilder that reported a $216.4 million first quarter loss and is in trouble with its lenders.

Headquartered in Boca Raton, Florida, turnaround-focused private equity firm Sun Capital manages roughly $6 billion in capital. The firm is currently embroiled in a lawsuit filed by Mervyns. The California-based department store alleges that buyers Cerberus Capital Management, Sun Capital Partners and Lubert-Adler Real Estate, “siphon[ed]” around $1 billion in real estate assets from the company to leverage its $1.2 billion buyout, eventually forcing the company into bankruptcy.