loan oriented fund?
I read tons of material on the variations of PE funds and HFs, but I've never seen something about a fund that invests in commercial loans? Like what I have in mind is (way oversimplified) raise a fund, invest in mortgages/non liquid debts. I'm sure someone somewhere does this, can anybody just explain to me the mechanics of how something like this works from start to finish? How do you acquire the loans, do you just call up banks and try to negotiate deals to buy loans off of them? Any color/input is much appreciated.
People are already doing this. They buy some of the loans off the bank's books and put them in their portfolios. Some HF's are doing it.
So that's it? Pretty straight forward I would imagine, I just haven't read anything about it. Thanks.
They are basically buying nonperforming loans or buying performing loans at a small discount and the company selling the loans becomes a conduit through with institutions buy packages of loans and receive an income stream.
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There are many of these already in existence. Banks sell off underperforming/non-performing loans in pools to these investors. There are two types of investors, active and passive. Active are hoping to take control of the borrower's assets ("loan to own"). Passive are attempting to collect on the appreciation through refinancing and/or bankruptcy liquidation.
Discounts on the debt ranges. I've seen some as low as 35-40% in the middle market (BMO portfolios).
What about non-securitized performing loans? Can I just call up Wells Fargo and buy people's mortgages?
Do you have hundreds of millions of dollars to put to work?
If I did I wouldn't be on here asking, so that's pretty much what I figured then is that you can do that but only in size, right?
Correct. From the bank's perspective, it isn't worth its time and money to sell off NPLs, RPLs or performing loans in small quantities.
Lone Star Funds...this is what they do.
That is one of the huge players.
Lone Star Funds...this is what they do.
I assumed the size aspect was a given, any other funds who do this that I should look at? Thanks for the replies also.
Fortress would be another big one
Oaktree and Colony Capital are the other two big buyers of M&I, Lasalle, etc. loans.
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