Smaller Firms Good Fit for Distressed Investment

Established in 1995, Connecticut-based Contrarian Capital Management, LLC, focuses on distressed investment financings and management of such assets. Barron’s recognized two of Contrarian Capital’s hedge funds as among the top performers in the United States. 

Large investment firms continue to experience the limitations imposed by new state and federal banking regulations. Moreover, the current credit crunch creates increased pressure for large firms to generate revenue for shareholders. In this environment, many distressed asset financings today involve smaller firms with more flexibility to wait for such companies to begin to perform favorably or attract new buyers.

Small firms often hold the upper hand in acquiring distressed assets and managing them successfully because they can develop strategies based on long-term goals rather than structured benchmarks. In some cases, larger firms sell assets before they reach their optimal value because the assets have exceeded their risk appetite. A smaller firm that specializes in distressed investing often provides cash, management, and other oversight to help a company emerge from financial volatility. Most large firms focus on increasing wealth in the markets rather than in the board room, but a smaller firm will build wealth with a cohesive, overall approach to stabilizing businesses.

Economic Benefits of Distressed Investing in Europe

With headquarters in Greenwich, Connecticut, and international offices in Paris, Hong Kong, and São Paulo, Brazil, Contrarian Capital Management, LLC, offers expert financial structuring strategies that enable distressed businesses to realize their full potential for profits and market penetration. In addition, Contrarian Capital provides effective management of portfolios comprised of distressed property assets.

Many companies possess a product that meets the needs and demands of its target audience and fills a niche that was previously empty. Yet despite their excellent market potential, these organizations sometimes fail because of inadequate funding or inexperienced management. Investments in distressed companies provide significant opportunities to maintain the economic viability of these companies and carry them to profitability. Successful investments in the sector require significant knowledge and a cohesive financing plan, but many investors have seen their transactions yield favorable returns.

Companies in Western Europe, which continues to undergo economic change as a result of currency and political pressures, attract investors because of the highly advanced technology, business, banking, and transportation resources available in those countries. Moreover, the European Union supports programs that simplify the processes and rules for investments in companies that are struggling financially. As a result, the climate for investment in distressed business remains extremely positive for a growing number of investors from the United States and Asia who choose to focus on this influential and important market.

Why Invest in Emerging Markets?

Mid-sized, privately owned distressed securities investment firm Contrarian Capital Management, LLC, conducts its business on a global scale. Based in Greenwich, Connecticut, with additional offices in Sao Paulo, Paris, and Hong Kong, it allocates many of its resources towards the exchange of distressed securities in emerging markets. Contrarian Capital employs several emerging market experts to manage international portfolios and research trends and investment opportunities abroad.

Characteristics of emerging markets include a basic, though underdeveloped, financial infrastructure, an economy characterized by brisk economic growth, and industrialization. Although the largest emerging markets are represented by China and India, Brazil and Russia are not far behind. Despite the inherent risk of investing in developing economies, investors have begun to focus heavily on these markets because of their potential for high returns on investment. In Q1 of 2011, for example, hedge fund capital in emerging markets achieved a record high of over $120 billion, which has increased steadily ever since.

Contrarian Capital Management Versus Other Hedge Funds

While most people are aware that stocks tend to have very high rates of return on investment (especially when compared to today’s sluggish interest rates), it is still tough to decide where you might want to invest your money. While a medium-sized capital investment company like Contrarian Capital Management, LLC, might be tempting, perhaps hedge funds are an easy choice, since they are what small-time investors often call “big money.”

That would be an incorrect assumption. In fact, in 2012, hedge funds posted a minuscule 3 percent gain relative to the 18 percent jump in the S&P 500. While some might be willing to accept this as a yearly fluctuation, that would also be incorrect. Since 2003, hedge funds have underperformed the equity-bond index every single year. That’s right–the hedge funds charge fees for their investment expertise, yet they fail to deliver returns that can outpace even the most basic of free advice. While the top 10 percent of managers managed to return 30 percent in 2012, the bottom third actually lost their investors’ money.

As an investor, you want to make sure that you choose an investment company that will net you gains, not losses. Contrarian Capital Management, LLC, uses conservative contrarian investment strategies to locate valuable financial instruments among distressed securities. With over 27 years of experience, Contrarian has successfully capitalized on areas outside of the main stock indices with high barriers to entry.

Contrarian Capital Management: An Overview of White Knight Financing

A multi-billion-dollar international distressed-securities investment firm, Contrarian Capital Management has its global headquarters in Greenwich, Connecticut, with international offices located in Sao Paolo, Paris, and Hong Kong. With a special focus on capital preservation, Contrarian Capital Management has a strong interest in private securities, and is dedicated to locating unique “off-the-run” risk/reward investment opportunities.

When a target organization risks being taken over by an undesirable potential acquirer, it may solicit or receive investment interest from a third, more desirable party, known as a “white knight.” This individual or corporation may succeed in rescuing the distressed organization from a hostile acquisition situation. The unfriendly acquiring entity is referred to as the “black knight,” and may have had plans to replace the target company’s board of directors or management following takeover.

The white knight may succeed in acquiring the distressed organization by negotiating with management and suggesting more favorable terms, or by offering a higher bid. Sometimes, a new bidding party appears, perhaps a “gray knight,” that is, a corporation or individual considered more favorable than the black knight, but less favorable than the white knight.

Contrarian Capital Management: Reasons to Acquire Distressed Property

ContrarianCapitalSince the firm’s founding in 1995, Contrarian Capital Management has considered investing in distressed real estate a top priority. Co-founder Gil Tenzer comes from a 24-year background in real estate and drives most of the company’s efforts in that area. Specifically, Contrarian Capital Management uses proprietary sourcing techniques and collaborates with local partners to acquire distressed property.

Real estate becomes distressed when it has entered foreclosure, providing the opportunity for investors to acquire it at bargain basement deals. Homeowners are eager to get rid of such property since they are experiencing financial difficulties, and the bank wants to sell the property to break even or better on the money it loaned to the homeowner for a mortgage. Many individuals do not buy distressed homes to live in but rather to resell. As market values increase, investors can make tidy profits on such property.

Investors should take care not to purchase distressed property in a state of disrepair. At the same time, homes in need of a little elbow grease can still sell for high values later on. Inspect the home to target repairs and upgrades at reasonable prices, and make those upgrades to increase the home’s value as market prices rise.

Contrarian Capital Management: Common Measures for Financial Risk Mitigation

A privately owned distressed-securities investment firm in Greenwich, Connecticut, Contrarian Capital Management is dedicated to managing secured senior distressed debt investment opportunities. With a team of 53 employees in four international locations, Contrarian Capital Management specializes in capital preservation, complex claims, and private securities.

Facilitating a good cash flow is an effective measure for reducing financial risk and pursuing investment opportunities. Funds may be raised through the sale of current assets or through a sale leaseback arrangement, should the business own property. Repayment can be avoided through the issuing of stocks, which is more expensive than debt, but eliminates the organization’s obligation to make repayments. Additionally, this strategy comes with fewer limitations than those connected to a loan from a credit institution.

Negotiation with suppliers may result in extended length on terms, and the repayment of bank loans and bondholders with newly acquired cash will significantly reduce financial risk.