Blackstone Opens Europe Spigot As Distressed Deals Surge

By Mark Thompson @MarkThompsonCNN October 3, 2013: 8:27 AM ET Greek Prime Minister Antonis Samaras has stuck to the task of painful economic reforms. LONDON (CNNMoney) Investors are scouring Europe for ways to make money from its tentative recovery, and one U.S. firm thinks it has found the answer — buy Greek government bonds. Japonica Partners said it believed Greek debt was “massively undervalued” and should be rated several notches above the junk status assigned by the big credit rating agencies. Greece has been shut out of international bond markets since 2010, when its government borrowing spiraled out of control. It has been rescued twice by the European Union and International Monetary Fund and was forced to restructure its debt in March 2012, imposing losses of more than 100 billion euros on private bondholders. Related: Europe’s recovery is weak, warns ECB But hedge funds — such as Dan Loeb’s Third Point — and other niche investors who bought into Greek debt since the restructuring have made a killing. Yields on Greek 10-year debt in the secondary market have plunged from around 44% in March 2012 to 9%. Japonica’s statement was greeted with derision by some investors Thursday, but the firm that made its name restructuring bankrupt Allegheny International in the early 1990s believes it has spotted an opportunity others may have missed. It claims to have become one of the larger, if not the largest, holder of Greek government bonds, and has hired a former senior executive from Norway’s oil fund — one of the world’s biggest investors — to help manage the portfolio. Related: Investors embrace European stocks “Greece is one of history’s most extraordinary sovereign rejuvenations hidden in plain sight by pervasive systemic misperceptions,” Japonica said, adding it expected yields should break below 5% in 2014.

Britain and Ireland tied 9-9 with Continental Europe at Seve Trophy in France

Paul Casey and David Lynn beat Miguel Angel Jimenez and Matteo Manassero by a hole to even the contest. Lynn converted a birdie putt from 10 feet on the last hole. The weeks best news photos Heres a quick way to catch up on the weeks news, through some of our favorite photos. Its been so close all week. It could have gone either way, Casey said. It seems like we have been getting off to bad starts all week, and this session, looked like we were getting off to a good start and things went a bit pear shaped in the middle. The tournament ends on Sunday with 10 singles. Each team needs 5 1/2 more points for victory. Continental Europe lost the last six meetings and is trying to win the trophy for the first time since the inaugural contest in 2000. I want to win it badly, its as simple as that, Europe captain Jose Maria Olazabal said. I dont like that record at all and hopefully this group of 10 people will be able to achieve that tomorrow. After two days of fourballs, Continental Europe was leading 5 1/2-4 1/2. On Saturday morning, Nicolas Colsaerts and Gonzalo Fernandez-Castano halved their match with Stephen Gallacher and Paul Lawrie. The Scottish duo was three down after eight holes, but birdied Nos. 16 and 17.

The American buyers arent just picking up bundled loans from banks. Blackstones $63.9 billion real estate unit has focused on buying single European properties threatened with foreclosure and on debt-laden developers. The unit, which can make investments in distressed or non-distressed assets, bought underused European warehouses this year and 1,860 apartment units in Madrid. It purchased Dublins Burlington Hotel late last year in a foreclosure sale from Lloyds at less than a quarter of its 2007 price. Multi Restructuring Since last year, Blackstone has teamed with Canadas biggest pension-fund manager to buy 640 million euros in nominal value of margin loans backed by a 12 percent stake in Gecina SA, Frances third-largest real estate investment trust. It also bought almost all of 900 million euros in face value of debt owed by Gouda, Netherlands-based Multi Corp., a shopping-mall developer that said in March it couldnt meet interest payments. Blackstone last month completed a restructuring that gave it close to full ownership of Multi, said a person with knowledge of the matter who asked not to be identified because the deal is private. Jonathan Gray , who heads the firms real estate unit, said Gecina and Multi were the 2009 funds biggest investments. He declined to specify how much Blackstone spent. In Europe, distressed is all weve been buying, Gray said. Rescue Financing Blackstones GSO credit unit has made loans to cash-constrained companies as banks pulled back. It injected $1.7 billion in six European companies over the past two years, including EMI Music Group Ltd., U.K. homebuilder Miller Group Ltd. and Spanish cement maker Cementos Portland Valderrivas SA. The unit plans to funnel $1.5 billion to $2.5 billion of a $5 billion global fund it completed raising last month into restructurings and bailouts of European companies that have violated the terms of their loans or have maturing debt they cant repay, according to GSO Co-Founder Bennett Goodman .