LONDON (Reuters) – U.S. Investment bank Goldman Sachs (GS.N) plans to spend part of its $20.3 billion private equity fund on acquiring distressed debt, a source familiar with the situation said.
Of the $9 billion yet to be invested, Goldman plans to put $4.5 billion into stressed and distressed investments, and increase purchases of debt and equity securities to 25 percent of total commitments from 10 percent, the source said.
Private equity firms have started to look for alternative ways of spending their investors’ money, including buying company debt trading at steep discounts, as the traditional leveraged buy-out market has ground to a halt.
Leon Black, founder of U.S. firm Apollo Management APOLO.UL, said last month he would focus his $14.8 billion fund on credit-oriented investments for the next 18 months in the absence of traditional buyout deals.
Private equity buyers can either hold the investment to maturity in the hope achieving private-equity-like net returns in the region of 20 percent, or try and take control of companies when they breach banking covenants.
(Reporting by Simon Meads, editing by Will Waterman)