Starwood affiliate seeks $1bn for distressed consumer financial assets

Balbec Capital, a Starwood Capital Group affiliate, is looking to corral up to $1 billion as it markets its latest vehicle that invests in distressed financial assets, according to a Securities and Exchange Commission regulatory filing.

The Scottsdale, Arizona-based firm has locked down $491.81 million for InSolve Global Credit Fund III. Its predecessors, Fund I and Fund II, raised $123 million and $629.2 million, according to Balbec’s website.

The strategy invests in “steeply discounted” claims that are part of a bankruptcy cases, according to a statement announcing Fund II’s closing. The assets are typically credit card and other personal loan claims that will be satisfied via a reorganisation plan outlining the payment schedule for the given claim.

Investor appetite for financial assets has been strong, with Atalaya Capital Management set to close on the $900 million hard-cap for its “substantially oversubscribed” Atalaya Asset Income Fund IV. The Atalaya vehicle also invests in credit cards and consumer financial assets but deploys money into commercial finance aspects.

“It’s not straight-down-the-fairway direct lending,” firm founding partner and chief investment officer Ivan Zinn said of specialty finance in December. “It seems like people have their one to three corporate direct lending managers, and now they’re saying we like the return stream [from direct lending], but we want to diversify. It’s the first derivative away from corporate direct lending.”

Founded in 2010, Balbec Capital has invested $1.9 billion in 14 countries, according to its website. Its larger affiliate, Starwood, manages $56 billion in assets across myriad vehicles including private funds and real estate investments trusts.