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This New Credit Shop Refuses to Be Patient

As competitors hoard cash awaiting distressed deals, Man Group and Perry veterans want to invest now — and have a new fund to do it.

Himanshu Gulati — former head of U.S. distressed credit and special situations at Man GLG — has launched Antara Capital Partners with the backing of Blackstone and Corbin Capital.

Unlike many competitors that are sitting on investors’ cash, waiting for distressed opportunities to materialize, Antara says it will put money to work right away via event-driven investments. The firm will invest in distressed situations when they ultimately become available, according to Gulati, who launched the GLG Select Opportunities Strategy in 2015.

The current credit cycle is one of the longest on record, good for companies wanting to borrow money, but frustrating for distressed investors.

“Today’s environment demands that investors have a flexible strategy that can adapt to ever changing markets. Our approach is designed to be fluid across the cycle and capital structure while targeting the most compelling risk-adjusted returns at all times, not just when a distressed cycle presents itself,” Gulati said in an interview. “At Antara I am excited to be joined by a very experienced team that I managed in the past and we look forward to building on our previous accomplishments,” he said.

Blackstone and Corbin each invested $150 million and Antara also brought in $50 million in friends and family money. The firm plans to do a soft close of the fund at $600 million.

According to Preqin, distressed debt funds held $166.75 billion as of March 2018. The industry has $66.51 billion in dry powder — cash — waiting for deployment. Even five years ago, the industry was sitting on $35.3 billion.

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Manny Roman, Man’s CEO at the time and now head of PIMCO, recruited Gulati, who had spent nine years working at Richard Perry’s Perry Capital. At Perry, where he was most recently responsible for distressed securities and event/catalyst equities, Gulati generated $1 billion in profits, according to a person familiar with the firm. Gulati left Perry at the end of 2014, about two years before Perry shuttered the fund.

Gulati and the team believe it’s a good time in the debt markets to launch a new firm, even as credit continues to be freely available. To differentiate itself, Antara will invest in special situations equity and mid-cap, which the Antara team believes is less crowded in part because larger funds haven’t focused on the sector. Antara will avoid investing in larger cap names, a strategy that has made many peer funds highly correlated.

Gulati is structuring the new firm to take the best strategies of Man, which was focused on portfolio and risk management, and Perry, which had a bottom-up, fundamental approach to investing.

Antara, which means opportunity in Sanskrit, is a lift out of the investment management team from Man as well as key players from Perry, including Rick Paige, who is now co-head of research-legal. Paige worked for Gulati at Man on the Select Opportunities Strategy. He is an 18-year veteran of Perry, who invested in distressed, special situations equities and private lending, among other things.

Other Antara executives include Paul Lucas, former director of business development at Phoenix Investment Adviser, who will head marketing and investor relations; Eric Mason, who worked for Gulati at Man and is the former co-head of U.S. distressed research at Barclays/Lehman Brothers. At Antara, Mason is co-head of research-fundamental. The firm’s head trader is David Lieberman, who was senior head of credit trading at Moore Capital for nine years, and Lance Kravitz, former head of operations at Perry, is COO, CFO and chief compliance officer. 

On the long side, the portfolio will target less crowded idiosyncratic situations where there is an underlying catalyst, ideally ones where Antara can influence outcomes. On the short side Antara will focus on tail-risk hedging, and industry baskets. In addition, it will look for equity risk that’s masked as credit, according to the official familiar with the firm. For example, recent leveraged-buyouts with lax covenants and which involve equity-like risks, have been priced like credit. Antara will also offer co-investments. 

Man’s distressed credit and special situations shut down in the fourth quarter of 2017 and Gulati left in 2018. The Man GLG Select Opportunities Fund returned 11.9 percent net of fees for the 12 months ending December 2016, according to public filings. For the nine months ending September 2017, the fund returned 11 percent net of fees.

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