GoldenTree sees distressed opportunities in media, telecom, retail

Media, telecom, retail and energy industries offer attractive distressed investment opportunities because they are undergoing structural changes caused by technology development and changes in consumer preferences and policy, according to the chief investment officer of GoldenTree Asset Management LP.

The trend toward consolidation will eventually improve the supply and demand conditions at the companies in the sectors that also stand to benefit from the broader cyclical recovery, Steven Tananbaum, founding partner and CIO of GoldenTree Asset, told The Korea Economic Daily in an interview.

"There are industries in transition where changes in technology, supply and demand dynamics, or policy can cause disruption," he said. "We have been successful at capitalizing on complex situations -- often in large, fragmented capital structures."  

Tananbaum took the example of the oilfield services sector, which has been plagued by a surplus of providers, many of which had unsustainable balance sheets.

"We identified certain opportunities where we could create the business at a fraction of the company’s net asset value based on what the forward curve reflects for oil prices. We can release value by right-sizing the company’s balance sheet and through better execution of the business plan."

GoldenTree had invested close to $7 billion in distressed assets between 2015 and 2019, even when the global economy was solid with low loan defaults.

Founded in 2000, it focuses on credit investments, including high-yield bonds, leveraged loans, distressed debt and structured products. As an independent US asset manager, it is active in both mid-cap and large-cap deals. 

The written interview was conducted ahead of the ASK Conference 2021 to be hosted by this newspaper on May 12, where the New York-based asset manager will make a presentation on the topic of "Identifying value across a broad distressed opportunity set." 

DIRECTORIES IN TRANSITION

The firm's previous investments in sectors in transition included businesses involved in phone and address directories, which proved highly successful. 

"These companies have been over-leveraged and impacted by the transition from print media to digital. However, through capital investment, right-sized capital structures and the right management teams, we created sustainable, high free cashflowing business that have provided very attractive returns on investment," Tananbaum saod

The lessons learned from its two-decade experience are: "There are typically periods of forced selling and stressed trading opportunities that present unique investment opportunities." He stressed that trading opportunities tend to increase in volatile periods.

But some distressed opportunities happen regardless of economic and market conditions, in particular, outside of the traditional corporate sector.

"Some of our most successful distressed investments have been non-corporate opportunities such as sovereign, municipal, or structured products investments," the CIO said. These investments tend to be highly complex, often involving multiple entities and require a combination of restructuring, operational and active trading components to drive value.

"Importantly, these situations can arise independent of the broader economic environment," he added.

GoldenTree manages nearly $42 billion as of Apr. 1 with investments across over 20 different sectors globally, the majority of which are distressed assets. 
 
Write to Ji-Hye Min at spop@hankyung.com
Yeonhee Kim edited this article.