MatlinPatterson Global Advisers LLC, the investment firm that specializes in taking control of companies by buying distressed debt, is seeking as much as $2 billion for its latest fund, 60 percent less than the predecessor, after suffering some high-profile missteps since the 2008 financial crisis.
The New York-based firm, run by former Credit Suisse Group AG bankers David Matlin and Mark Patterson, is targeting $1.5 billion to $2 billion for a global opportunities fund, according to two people with knowledge of the fundraising, who asked not to be named because the plans are private. The prior fund, gathered at the peak of the buyout boom in 2007, closed at $5 billion.
After scoring big by buying the debt of MCI Inc. and Huntsman Corp. (HUN:US) at the start of the last decade, the firm has faced performance issues following investments in Thornburg Mortgage Inc. and failing bond brokerage Gleacher & Co. MatlinPatterson is preparing to seek additional capital as investors seek to capitalize on European banks being forced to sell assets.
Andrew Siegel, a spokesman at Joele Frank, Wilkinson Brimmer Katcher declined to comment on behalf of MatlinPatterson.
Prior to starting the first fund in 2001, Matlin and Patterson worked together at Credit Suisse’s brokerage unit in New York. The debut fund was generating a multiple of 1.7 times invested capital and a 16 percent net internal rate of return as of Sept. 30, according to performance data by Oregon Public Employees Retirement System.
Later investments have had mixed success. MatlinPatterson’s $1.65 billion fund that closed in 2004 has struggled with a negative 28 percent net internal rate of return as of Nov. 30, according to performance data by University of Texas Investment Management Co. The firm’s last fund was valued above cost with a 1.4 times net multiple and an 8 percent net internal rate of return as of Dec. 31, according to one of the people with knowledge of the fund.
In 2007, MatlinPatteron’s 2004 fund invested in New York-based bond-trading firm Gleacher, which will liquidate after failing to find a merger partner or sell the brokerage. The fund sold a significant amount of its holdings in the company six years ago, according to one of the people with knowledge of the investments.
MatlinPatterson’s 2008 bailout of mortgage lender Thornburg also lost money for investors as homeowner defaults soared, property prices slumped, and the mortgage-backed securities market collapsed, resulting in bankruptcy in May 2009.
The firm’s last fund has several winners, including XLHealth Corp., which agreed to be sold in 2011 to UnitedHealth Group Inc., producing a 6 times multiple and a gain of $2 billion, according to the one of the people familiar with the returns. An investment in homebuilder Standard Pacific Corp. (SPF:US) is showing a total gain of about $1.2 billion, according to the person. The firm has realized 10 percent of that investment’s profit.
MatlinPatterson in 2012 entered into a strategic partnership with Allied World Assurance Company Holdings AG (AWH:US) to manage $500 million of Allied’s portfolio. The firm offers various credit strategies including control and non-control distressed investments and securitized credit.
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