Distress in Distressed: MatlinPatterson Takes Major Markdowns

I keep hearing that these are the salad days for distressed investors, but such present thinking ignores major troubles in legacy distressed portfolios. For example, take a look at the latest quarterly marks from MatlinPatterson, a New York-based firm with more than $7 billion in assets under management. What follows are through Q4 2008, and were sent to peHUB by a MatlinPatterson LP:

  • Fund III (2007): Down 39% quarter-over-quarter. IRR at -48% (0.61x)
  • Fund II (2003): Down 16% quarter-over-quarter. IRR at -12% (0.84x).
  • Fund I (2001): Down 49% quarter-over-quarter. IRR at 15% (1.62x).

Making matters even drearier, that Fund III figure has suffered some additional damage in Q1, as MatlinPatterson wrote off the entirety of its investment in Thornburg Motgage (which is filing for bankruptcy and shutting down). As of Dec. 31, Matlin Patterson was still carrying it at betwen 10% and 20% of cost.

I did speak briefly to Mark Patterson, but he declined comment.