Alternatives

Invesco Distressed Credit Strategy

By sourcing the debt of distressed companies within inefficient markets, the strategy provides an evergreen opportunity regardless of the credit cycle.

At a glance

Unlike traditional large-cap distressed strategies that are often dependent on market cycles, recessions or sector-specific shocks, we focus on idiosyncratic or company specific opportunities. We use our proprietary sourcing mechanism, rigorous diligence and an active approach to value creation to develop a differentiated, complementary and diversified portfolio. 

INTEGRATED CREDIT PLATFORM

Invesco’s global credit platform yields an edge in sourcing, diligence and execution, and offers diverse industry exposure.

INEFFICIENT MARKET FOCUS

Small and middle market companies are less dependent on economic or commodity cycles – making it possible to identify and deploy capital independent of default cycle.

PROACTIVE VALUE CREATION

Key value drivers and catalysts are identified up front. The team’s integral, activist role gives the ability to instigate change.

Objective

This strategy targets equity-like returns through distressed and special situations investments, by purchasing underperforming corporate debt from existing lenders at a discount to par¹.

Investment approach

The strategy employs a fundamental, high conviction approach – investing at a discount to intrinsic value. Through extensive in-depth diligence, the strategy primarily purchases debt from forced sellers driven by internal limitations, and fatigued investors unwilling to own distressed debt or go through a workout process.

The team seeks to add value through an investment process focused on control and hands-on management of individual distressed investment opportunities. In managing these types of assets, the ICP team uses its experience in the bankruptcy process and in turnarounds, and also its ability to access capital and strategic partners to maximise the return from the identified underlying investment opportunity.

The team focus on opportunities in the small capitalisation and middle market space which comprises companies of less than $1B enterprise value.  As a result, it offers a diverse opportunity set with structural inefficiencies:

  1. Focus on inefficient markets: Small cap/ middle market is less efficient allowing the team to purchase positions inside of intrinsic value. Information asymmetry exists because these loans are private­ side without public filings, have a relatively small base of lenders and are not actively covered by trading desks. This access challenge creates unique opportunities for investors with the skillset and competency to exploit these inefficiencies.
  2. Evergreen: Opportunity set is independent of economic cycles which mitigate market timing concerns. Small cap/ middle market distressed credit is differentiated from the large cap market as opportunities tend to be idiosyncratic or company specific rather than thematic or cycle driven. Examples include working capital issues, customer losses, integration inefficiencies, operational or manufacturing issues.
  3. Diversified: Small cap distressed opportunities tend to be diversified across sectors reducing industry-specific risk. Large cap distressed credit tends to be concentrated within pockets of weakness or cycle driven opportunities. In previous years, this emphasised energy and retail, and now first derivative COVID impacted industries (travel, leisure, etc.); ICP’s first vintage portfolio includes 17 different sectors and the team currently see a diverse pipeline of fundamentally sound, COVID-19 resilient companies. 

Why Invesco Credit Partners

Acknowledged as one of the world’s leading turnaround groups, Invesco Credit Partners invests in, and restructures, financially distressed situations with the objective of creating sound enterprises and commensurately improved asset valuations.

Invesco’s Private Credit platform: With over $43B in AUM in private credit across capabilities in broadly syndicated loans, direct lending and distressed credit, the platform is one of the largest loan trading counterparties and provides a significant sourcing, diligence and execution advantage².

Experienced team: The strategy is managed by a dedicated team of over 100 investment professionals with an average 20+ years' experience. They have deep restructuring and workout expertise and over $200bn of liabilities has been restructured. The ICP team has built an extensive relationship network over the last two decades and benefits from private side information from Invesco’s Bank Loan investment team.

Proactive value creation:  When the team become involved in a transaction, they up front identify the key value drivers and catalysts with a two-to three-year investment horizon. The investment team takes an activist approach to financially and operationally intensive restructurings which is a key differentiator defining our value-add investment style, often participating on steering committees where the team use their expertise to extract value.

Investment team

Invesco’s Distressed Credit team leverages a Global Private Credit platform of 112 professionals.

Scott Baskind is Head of Global Private Credit and Chief Investment Officer of Invesco’s Global Private Credit platform, which includes Broadly Syndicated Loans, CLOs, Direct Lending, Distressed Credit, and Opportunistic Credit.

Paul Triggiani is a Managing Director and Head of Distressed Credit at Invesco. In this role, he is focused on credit opportunities, distressed debt and special situations investments.

Meet the team

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Footnotes

  • 1 There can be no assurance that target returns will be realised.
    2 Source Invesco, as at 31 December 2021.

     

Investment risks

  • The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.

     

    Alternative investment products may involve a high degree of risk, may engage in leveraging and other speculative investment practices that may increase the risk of investment loss, can be highly illiquid, may not be required to provide periodic pricing or valuation information to investors, may involve complex tax structures and delays in distributing important tax information, are not subject to the same regulatory requirements as mutual funds, often charge higher fees which may offset any trading profits, and in many cases the underlying investments are not transparent and are known only to the investment manager.

     

    An investment involves the risk of loss. Investment products such are designed only for sophisticated investors who are able to sustain the loss of their investment. Accordingly, such investment products are not suitable for all investors. The strategy is not subject to the same or similar regulatory requirements as mutual funds or other more regulated collective investment vehicles. There can be no assurance that the strategy’s investment objective will be achieved.

     

    The strategy will from time to time rely upon projections, forecasts or estimates developed by the strategy or a company in which the strategy is invested or is considering making an investment concerning the company’s future performance and cash flow. Projections, forecasts and estimates are forward-looking statements and are based upon certain assumptions. Actual events are difficult to predict and beyond the strategy’s control. Actual events may differ from those assumed.

     

    The strategy is intended for long-term investment and for investors who can accept the risks associated with making highly speculative, primarily illiquid investments in privately negotiated transactions.

     

    Debt instruments are exposed to credit risk which is the ability of the borrower to repay the interest and capital on the redemption date. The strategy’s investment in “distressed” securities, which are claims and obligations of entities which are experiencing significant financial or business difficulties, may result in large fluctuations in the value of the strategy.

     

    The strategy invests in corporate debt obligations, including unsecured loans and investment in equity tranche, which involves a higher degree of risk of a loss of capital.

     

    To the extent the strategy invests a greater amount in any one sector or industry, there is increased risk to the strategy if conditions adversely affect that sector or industry.

     

    The strategy is permitted to hold interests in various derivative instruments indirectly or directly, including options, swaps, forward contracts and other derivatives to hedge overall portfolio risk or individual position risk and for speculative purposes.

     

    Operational risk is embedded in operating the strategy, which is mainly linked to potential valuation issues and handling restructuring or legal process related to its investments.

Important information

  • This is marketing material and not intended as a recommendation to buy or sell any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication.

     

    This material should not be considered financial advice. Persons interested in acquiring the products should inform themselves as to (i) the legal requirements in the countries of their nationality, residence, ordinary residence or domicile; (ii) any foreign exchange controls and (iii) any relevant tax consequences.

     

    Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice.