Despite a challenging environment, global private equity remains bullish, and many of these so-called vulture capitalists have been circling distressed Irish assets for some time. So who are they and are they about to descend, asks FIONA REDDAN

SINCE THE COLLAPSE of Lehman Brothers in 2008, US private equity funds, the so-called “vulture capitalists”, have been sniffing around distressed Irish businesses. They first concentrated on the financial sector, and have now started to extend their reach. But, despite having ready access to billions and a strong appetite to invest, such funds have to date largely played a waiting game. So who are they and why aren’t they investing?

Such deals from international players have been few and far between. Indeed, the top 10 funds only transacted deals valued at €1.7 billion between them. The reasons for this are varied. Firstly, despite the unprecedented economic volatility in the euro zone, there simply aren’t enough distressed assets coming to the market. Factors such as banks refusing to crystallise losses, plus the existence of state agencies such as Ireland’s National Asset Management Agency (Nama), who aren’t up for a “fire sale” of assets, mean pickings are slim.

Moreover, given that the number of funds on the road hit a record in the first quarter of 2012, competition remains fierce for the assets that are available – and upward pressure on prices does not tend to appeal to these specialist distressed investors.

But there is plenty of money out there, despite the challenging environment. According to data provider Preqin, $50.6 billion was raised in the first quarter of 2012, which is comparable to recent quarters, indicating that fundraising has remained relatively steady overall.

And interest in Ireland continues to grow. Recently, UK outfit Forum Partners poached Enda Farrell from Nama no doubt to look for distressed debt deals in the Irish market, a role which will include “sourcing loans from Irish financial institutions, creating new products for investment in Ireland” and helping its Crown subsidiary build their loan-servicing platform for Irish banks.

So you might be seeing more from the funds below in the near future.

APOLLO GLOBAL MANAGEMENT

Apollo, which is headed by prodigious art collector and billionaire Leon Black, invests in distressed companies all over the world through its $75 billion funds.

Its European fund, Apollo European Principal Finance Fund, has been a significant investor in European non-performing and illiquid loan portfolios divested by financial institutions, with 20 transactions over the past four years. It had raised €1.3 billion by the end of 2011, and has led to the launch of a second, similar fund, which has $200 million in commitments.

In March, it acquired MBNA’s €650 million Irish credit-card portfolio for an undisclosed sum, and 250 employees will continue managing these accounts from its base in Carrick-on-Shannon.

And there may be more to come. Last summer, it made a joint bid for Irish Life Permanent’s insurance arm, Irish Life, while former Bank of Ireland chief Brian Goggin is a director of a fund started in 2010, Financial Credit Investments, along with Apollo partner Gernot Lohr. Its aim is to “invest in longevity-based assets, which include financial products like life-insurance policies sold in secondary markets” – hence the interest in Irish Life. As of the end of 2011, the fund had raised more than $500 million.

BETTER CAPITAL

Led by Jon Moulton, one of the UK’s most high-profile private equity honchos, Better Capital has been sniffing around distressed Irish companies for some time now, with Moulton expressing his discontent at the apparent slowness with which banks have moved on indebted companies.

In 2010, he took his relationship with IT services company Calyx full circle. Moulton originally took a majority share in the group when he was still with Alchemy Partners, the firm he founded in 1997, but sold it back to Calyx co-founder Maurice Healy a year later. After a boardroom bust-up at Alchemy, Moulton set up Better Capital, acquiring the trade and assets of certain subsidiaries of Calyx in September 2010 – and also benefiting from a debt write-down thanks to Anglo Irish Bank.

Earlier this year, Better Capital acquired the Irish and UK operations of office products company, Spicers, but more activity could be on the way. Last year, the firm launched a second fund, Better Capital Fund II, to invest principally in UK and Irish turnaround opportunities. By the end of last year, some £158 million had been raised.

GORES GROUP

Reportedly interested in buying a stake in indebted waste management business Greenstar, this US private equity firm, which focuses on acquiring controlling interests in “mature and growing businesses”, has also recently been linked with the plastics unit of One51.

Founded by Alec Gores in 1987, the $4 billion firm recently closed a $300 million fund, which will invest in lower middle market businesses. Gores is worth almost $2 billion according to Forbes, which ranks him 683rd richest in the world.

WL ROSS

Led by the formidable 74-year old Wilbur Ross, this “leading turnaround group” will be hoping it manages to do just that when it comes to the €1.1 billion investment, or 9 per cent stake, it took in Bank of Ireland last summer. A big fan of BOI chief executive Richie Boucher, Ross recently disclosed he aims to sell his stake in the bank at roughly three times its current value.

However, it’s not all plain sailing for Ross, who late last year became a co-owner of UK bank Northern Rock. Also last year, his firm, which he sold to Invesco in 2006, outlined plans to raise $4 billion for a new turnaround fund. This target was later halved.

OAKTREE CAPITAL MANAGEMENT

While its name pops up repeatedly on lists of interested bidders in a variety of distressed Irish assets this fund, which has more than $80 billion in assets under management has largely stayed on the sidelines to date – despite its best efforts.

More recently, the world’s largest distressed-debt investor, was reported to be a bidder for indebted business outsourcing group Siteserv, while last year it was set to invest up to €48 million in property developer McInerney Holdings, which was on the brink of collapse. However, the restructuring plan was turned down by the courts.

Nonetheless, Oaktree has strong Irish links. In 2010, the National Pensions Reserve Fund (NPRF) revealed that it had €103 million invested with the firm, in its OCM Opportunities Fund VIIb fund – at the time the largest distressed debt fund ever, having raised $10.6 billion.

BLACKSTONE GROUP

You’d think that Blackstone might not be very welcome in Ireland, given that chief Stephen Schwarzman told a Goldman Sachs seminar in 2010 that the time for investing in distressed foreign markets was when “there’s really blood in the streets”.

Nonetheless, managing director Tom Kelly attended the Global Irish Forum in Dublin Castle last October, while in November Schwarzman met with Taoiseach Enda Kenny.

Last August, it expressed an interest in Anglo Irish Bank’s $8 billion US loan book, but having failed to win that, in November, it acquired Dublin- based Harbourmaster Capital, a leveraged loan specialist, with some €8 billion in assets. Harbourmaster is embattled telecoms firm Eircom’s biggest lender.

Indeed, the firm is garnering an ever-higher profile in Ireland, having picked up the contract for overseeing the divestment of Irish Bank Resolution Corp’s (IBRC) €30 billion Irish and UK loan book, even though it has not been precluded from also buying the loans.

Former Greencore chief executive, Corkman Gerry Murphy, is also chairman of Blackstone’s European operation.

FORTRESS INVESTMENT GROUP

This $44 billion US private equity group is showing signs of growing links with Ireland. The NPRF has a €68 million investment in four of the group’s funds, according to its most recent annual report, while Fortress maintains a significant shareholding in airplane leasing company Aircastle, which it took public in 2006 and which has a Dublin operation.

And in May, Michael R George, a managing director in the group’s hybrid funds division, is set to join President Michael D Higgins, as well as other luminaries such as Bank of America’s Brian T Moynihan at The Ireland Funds’ New York Dinner Gala. Convenient, given that its name has popped up as reportedly bidding on assets such as Anglo Irish Bank’s wealth- management division.

It expects the “great liquidation”, as it has coined it, to generate some $5-$10 trillion in asset sales over the coming year, from countries such as Ireland.

The global ‘great liquidation’ could generate some $5-$10 trillion in asset sales over the coming year