Distressed debt and special situations specialist Arbitrium Capital Partners has set up a $300 million fund to help companies at risk of default as COVID-19 supports packages are removed.
The firm expected businesses would be most at risk from March 2021 and that the “true magnitude” of loan defaults as a result of COVID-19 would not be realised until next year.
Founders Daniel Liptak and Mukhtader Mohammed said there was the risk that non-investment grade loans to mid-market corporates were at risk of default in the next six months. This presented opportunities for the fund to invest in companies with strong fundamentals and turnaround prospects.
The fund had nearly 20% of its $300 million in committed capital and would open a Dublin structure to allow it to be accessed via offshore investors.
It was also seeking to expand the Arbitrium team with two new partners who had experience in distressed debt and had worked through different market cycles.
“Australia has a thriving medium enterprise community for many dssssssssecades, supported by strong regulatory and political frameworks,” said Mohammed.
“Unfortunately, many of these companies simply haven’t been able to meet fixed cost demands with the hit taken to topline revenues – but they’re still good companies that are likely to recover provided they can find support in a post-stimulus landscape.
“We tend to see family offices servicing distressed debt at the smaller end of the small and medium enterprise scale, and global funds looking to finance loans of $100 million and over, so there is this a giant gap in the middle that we will play a part in addressing.”
