(Bloomberg) — Oaktree Capital Group LLC co-founder Howard Marks is bracing for one of the best buying opportunities since the global financial crisis as interest rates rise and a recession looms. pushed many companies into dire straits.
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After dealing with “moderate” profits in part due to cheap credit over the past few years, the Los Angeles-based company with about $163 billion in assets is looking to fund those struggling. difficulty in paying debt.
“Now our times are turning back,” he told investors in Singapore this week and in a later interview with Bloomberg News.
Marks predicts US inflation may have peaked and expects interest rates to stay near the 5% mark for the next five to 10 years. The accompanying shift in consumer tastes, along with higher borrowing costs, will lead to “significant hardship” at many companies, he said.
He said of investors: “A year ago, the outlook was considered perfect and I think we will reach a point where they see it as hopeless. “And that’s when you get the big purchases. That’s when you become a cheap property buyer and a safe, high-interest lender.”
Credit markets have been simmering as the Federal Reserve raised interest rates at its fastest pace since the early 1980s. Banks that agreed to back loans at a price point months ago are noticing that tastes have changed and funds are demanding higher yields. That is prompting companies specializing in bad debts to prepare for a potential boom.
Marks said the banks’ losses on suspension bridge loans have hurt credit markets. One example is the acquisition of Twitter Inc. Elon Musk has left the company with nearly $13 billion in debt that is now in the hands of Wall Street banks trying to relieve investors.
After selling the loans at the wrong time, banks had to sell the loans at a discount as low as 70 cents per dollar, Bloomberg previously reported.
“Imagine the severity of those losses,” says Marks.
And while American companies generally aren’t highly leveraged, the predicament is piling up, he said.
“This will be a buyer’s market and a lender’s market. We’re going to have better opportunities,” he said, adding that technology acquisitions over the past 13 years have resulted in mounting debt. “We’ll find bargains in the ruins.”
–With support from Paula Seligson.
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