PSP Investments expanded its capacity for distressed debt investments after encountering enough private equity portfolio companies that could use financing outside the normal direct lending investment.
The retirement plan hired Francis Blair, formerly of Solus Alternative Asset Management, last week. Blair – who directly before his PSP appointment worked as a partner and senior credit analyst at Milford Sound Capital – was at Solus from 2007-16, according to his LinkedIn profile. He started his career as a credit trader at Deutsche Bank from 1998-2007.
PSP hired a distressed credit expert after it encountered multiple situations where private equity firms the retirement plan works with had portfolio companies in need of deleveraging or extending their debt maturities, Jeff Rowbottom, managing director of principal and credit investments, told Private Debt Investor.
The pension fund’s rescue financing commitments can be in both in-court and out-of-court restructurings. While PSP’s distressed team can invest across the credit spectrum, the retirement plan will favour commitments ranking higher in the capital structure, Rowbottom noted. The firm will concentrate where it has expertise, which include the financial services, healthcare, technology and industrial sectors, he added.
“The opportunity set is big enough for us to pursue now,” Rowbottom said, noting that the investment opportunities are currently more limited. “But there will be a next cycle and periods of market dislocation that will lead to a lot more opportunities.”
PSP is not planning on adding any set number of investment professionals to focus on distressed debt and rescue financing in the immediate future. Many of its existing senior investment personnel have some experience in workouts and reorganizations, but Blair’s addition gives the pension fund a dedicated specialist in the area, Rowbottom said.
While at Solus, Blair helped lead its investment in ITR Concession Company – the operator of the Indiana Toll Road – and its eventual $5.73 billion sale to IFM Investors. ITR Concession filed for bankruptcy following depressed revenues due to the recession. Blair was also involved in Solus’ investments in the bond obligations of Puerto Rico, the debt-laden US commonwealth that owes more than $70 billion.
Solus, a distressed debt and special situations hedge fund, manages $5.9 billion. Its flagship fund, Sola I, has raised $1.57 billion. The firm also runs single-opportunity and long-only strategies.