Fixed Income

Invesco Distressed Credit Strategy

By sourcing the debt of distressed, small capitalisation and middle market companies across industries, the strategy provides an evergreen opportunity regardless of the credit cycle.

At a glance

Unlike traditional large-cap distressed strategies that are often dependent on market cycles, recessions or sector-specific shocks, we focus on idiosyncratic or company specific opportunities where we use our proprietary sourcing mechanism, rigorous diligence and an active approach to value creation to develop a differentiated, complementary and diversified portfolio. 

Objective

Invesco Credit Partners strategy (“ICP”) targets 16-20%/1.5x-2.0x returns (annualised net returns over the life of the strategy) by purchasing underperforming corporate debt from existing lenders at a discount to par¹.

Investment approach

The strategy employs a fundamental, high conviction approach – investing at a discount to intrinsic value. Through extensive in-depth diligence, the strategy primarily purchases debt  from forced sellers driven by internal limitations, and fatigued investors unwilling to own distressed debt or go through a workout process.

The team seeks to add value through an investment process focused on control and hands-on management of individual distressed investment opportunities. In managing these types of assets, the ICP team uses its experience in the bankruptcy process and in turnarounds, and also its ability to access capital and strategic partners to maximise the return from the identified underlying investment opportunity.

The team focus on opportunities in the small capitalisation and middle market space which comprises companies ~ less than $1B EV (EBITDA ~$30-75m; commonality being they exhibit qualities of closely-held debt structures). This offers a diverse opportunity set with structural inefficiencies:

  1. Inefficient: Small cap/ middle market is less efficient allowing the team to purchase positions inside of intrinsic value. Information asymmetry exists because these loans are private­ side without public filings, have a relatively small base of lenders and are not actively covered by trading desks. This access challenge creates unique opportunities for investors with the skillset and competency to exploit these inefficiencies.
  2. Evergreen: Opportunity set is independent of economic cycles which mitigate market timing concerns. Small cap/ middle market distressed credit is differentiated from the large cap market as opportunities tend to be idiosyncratic or company specific rather than thematic or cycle driven. Examples include working capital issues, customer losses, integration inefficiencies, operational or manufacturing issues.
  3. Diversified: Small cap distressed opportunities tend to be diversified across sectors reducing industry-specific risk. Large cap distressed credit tends to be concentrated within pockets of weakness or cycle driven opportunities. In previous years, this emphasised energy and retail, and now first derivative COVID impacted industries (travel, leisure, etc.); ICP’s first vintage portfolio includes 17 different sectors and the team currently see a diverse pipeline of fundamentally sound, COVID-19 resilient companies. 

Why Invesco Credit Partners

Acknowledged as one of the world’s leading turnaround groups, Invesco Credit Partners invests in, and restructures, financially distressed situations with the objective of creating sound enterprises and commensurately improved asset valuations.

Invesco’s Private Credit platform: With over $32B in AUM in private credit across capabilities in broadly syndicated loans, direct lending and distressed credit, the platform is one of the largest loan trading counterparties and provides a significant sourcing, diligence and execution advantage².

Experienced team: The strategy is managed by a dedicated investment team with 20+ years of experience and deep restructuring and workout expertise with over $200bn of liabilities restructured. The ICP team has built an extensive relationship network over the last two decades and benefits from private side information from Invesco’s Bank Loan investment team.

Proactive value creation:  When the team become involved in a transaction, they up front identify the key value drivers and catalysts with a two-to three-year investment horizon. The investment team takes an activist approach to financially and operationally intensive restructurings which is a key differentiator defining our value-add investment style, often participating on steering committees where the team use their expertise to extract value.

Investment team

Invesco’s Distressed Credit team leverages a Global Private Credit platform of 112 professionals.2

Scott Baskind is Head of Global Private Credit and Chief Investment Officer of Invesco’s Global Private Credit platform, which includes Broadly Syndicated Loans, CLOs, Direct Lending, Distressed Credit, and Opportunistic Credit.

Paul Triggiani is a Managing Director and Head of Distressed Credit at Invesco. In this role, he is focused on credit opportunities, distressed debt and special situations investments.

Footnotes

  • 1 There can be no assurance that target returns will be realized.
    Source Invesco, as at June 30, 2021.

     

Investment risks

  • The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested. The strategy may invest in distressed securities which carry a significant risk of capital loss.

Important information

  • This marketing communication is for Qualified Clients/Sophisticated Investors in Israel only and is not for consumer use. Please do not redistribute. Investors  should read the legal documents prior to investing. By accepting this document, you consent to communicate with us in English, unless you inform us otherwise. This document is not for consumer use, please do not redistribute. Data as at 30.09.2021, unless otherwise stated.

    This document is marketing material and is not intended as a recommendation to invest in any particular asset class, security or strategy. Regulatory  requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before  publication. The information provided is for illustrative purposes only, it should not be relied upon as recommendations to buy or sell securities.

    This document is for informational purposes only and is not an offering. This document does not take into account individual objectives, taxation position or financial needs  and should not be relied upon as the sole factor in an investment making decision. Nor does this constitute a recommendation of the suitability of any investment strategy  for a particular investor. Investors should not invest in the fund solely based on the information provided in this document.

    Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and  are subject to change without notice. For more information on our funds and the relevant risks, please refer to the share class-specific Key Investor Information Documents (available in local language), the Annual or Interim Reports, the Prospectus, and constituent documents, available from www.invesco.eu. A summary of investor rights is available in English from https://www.invescomanagementcompany.lu. The management company may terminate marketing arrangements.

    This marketing document is not an invitation to subscribe for shares in the fund and is by way of information only, it should not be considered financial  advice. This does not constitute an offer or solicitation by anyone in any jurisdiction in which such an offer is not authorised or to any person to whom it is unlawful to make  such an offer or solicitation. Persons interested in acquiring the fund should inform themselves as to (i) the legal requirements in the countries of their nationality, residence,  ordinary residence or domicile; (ii) any foreign exchange controls and (iii) any relevant tax consequences. As with all investments, there are associated risks. This document  is by way of information only. Asset management services are provided by Invesco in accordance with appropriate local legislation and regulations. The fund is available only in jurisdictions where its promotion and sale is permitted. Not all share classes of this fund may be available for public sale in all jurisdictions and not all share classes  are the same nor do they necessarily suit every investor. Fee structure and minimum investment levels may vary dependent on share class chosen. Please check the most  recent version of the fund prospectus in relation to the criteria for the individual share classes and contact your local Invesco office for full details of the fund registration  status in your jurisdiction.

    Israel: Issued by Invesco Asset Management Limited, Perpetual Park, Perpetual Park Drive, Henley-on-Thames, Oxfordshire RG9 1HH, UK. Authorised and regulated by the  Financial Conduct Authority. No action has been taken or will be taken in Israel that would permit a public offering of the Fund or distribution of this document to the public  in Israel. This Fund has not been approved by the Israel Securities Authority (the ISA). Accordingly, the Fund shall only be sold in Israel to an investor of the type listed in  the First Schedule to the Israeli Securities Law, 1968, which has confirmed in writing that it falls within one of the categories listed therein (accompanied by external  confirmation where this is required under ISA guidelines), that it is aware of the implications of being considered such an investor and consents thereto, and further that the  Fund is being purchased for its own account and not for the purpose of re-sale or distribution. This document may not be reproduced or used for any other purpose, nor be  furnished to any other person other than those to whom copies have been sent. Nothing in this document should be considered investment advice or investment marketing  as defined in the Regulation of Investment Advice, Investment Marketing and Portfolio Management Law, 1995 (“the Investment Advice Law”). Investors are encouraged to  seek competent investment advice from a locally licensed investment advisor prior to making any investment. Neither Invesco Ltd. Nor its subsidiaries are licensed under the  Investment Advice Law, nor does it carry the insurance as required of a licensee thereunder. This document does not constitute an offer to sell or solicitation of an offer to  buy any securities or fund units other than the fund offered hereby, nor does it constitute an offer to sell to or solicitation of an offer to buy from any person or persons in  any state or other jurisdiction in which such offer or solicitation would be unlawful, or in which the person making such offer or solicitation is not qualified to do so, or to a  person or persons to whom it is unlawful to make such offer or solicitation.