Fortress boss sees surge in distressed debt as SoftBank sells firm to Mubadala

A sharp credit contraction due to the banking crisis and rising interest rates will trigger a wave of defaults, said Pete Brigger, co-founder of Fortress Investment Group, which was sold on Monday by SoftBank to an arm of Abu Dhabi’s sovereign wealth fund Was. Property manager’s own staff.

In an interview with the Financial Times, Brigger said the expected market turmoil created the best opportunity for distressed property investors since the 2008 financial crisis. Thus, it was a good time for Fortress employees to buy the firm, which specializes in distressed loans and other debt-based investment strategies and has $46bn in assets.

“The amount of credit that is in the world right now is getting smaller every day. , , It has become difficult for companies to take loans. The banking system itself is also experiencing a restructuring as fractional reserve banking no longer operates in its current form,” Brigger said.

“Asset values ​​have taken a hit, especially in real estate, growth equity and venture capital,” he said.

On Monday morning, SoftBank announced it was selling the US-based investment group to Mubadala Capital, an arm of Abu Dhabi’s sovereign wealth fund and Fortress Management.

Mubadala would buy 70 percent of the fort, while insiders like Brigger would buy the remaining 30 percent. Fort employees will control the company’s board and have the potential to become majority owners in the coming years depending on the group’s financial performance.

While terms of the deal were not disclosed, the Financial Times previously reported that Mubadala and Fortress Management would pay up to $3 billion, less than the $3.3 billion SoftBank paid to take the firm private in 2017. Fortress and Mubadala declined to comment on pricing. deal.

SoftBank’s acquisition of Fortress in 2017 came as founder Masayoshi Son sought to create an asset management arm within the Japanese investment conglomerate. But SoftBank’s huge interest in Chinese e-commerce giant Alibaba led US regulators to rule in 2018 that the two firms could not be integrated.

The arms-length partnership has been “perfectly good”, Bridger said, but once SoftBank started raising its Vision Fund, “we became less interesting to them” and were “not strategic”.

In August, SoftBank said it would consider selling Fortress as investment losses from its Vision Fund mounted.

“They were interested in selling for their own particular reasons,” said Brigger, who noted the investment opportunities to come made it “a very good time to buy a company like ours.”

During sale talks, Fortress told its investors that it was “in control of its own destiny” and could be sure that the structure of the deal would not reduce investment performance, the FT previously reported.

The purchase will create an opportunity for all Fortress employees to own a portion of the group and encourage succession planning. Brigger and Fortress co-founders Wes Edens will step down as co-CEOs, while managing partners Drew McKnight and Joshua Pack will become co-CEOs.

The succession is meant to provide more opportunities for a new generation of Fortress investors to take leadership positions, Bridger said, who will become chairman, oversee personnel issues and remain on Fortress’ investment committee.

“I might start my own fund within the firm. . . I’m certainly not retiring to play golf,” Brigger said. “I probably wouldn’t have final say on 400 emails a day.”

Edens, who led Fortress’ private equity business, will continue to oversee legacy investments such as the 2007 acquisition of Florida-based Rail Line, which has been converted into a high-speed commuter rail network called BrightLine.

Fortress was the first large private capital firm to go public, listing its shares in early 2007. This set off a wave of similar offers from the likes of Blackstone, KKR, Apollo and Carlyle, which eventually went public.

But Fortress’ buyout arm struggled during the crisis as highly profitable deals such as its acquisition of ski operator Intrawest were struck. Since the crisis, Fortress’ private equity business has not raised any new buyout funds.

Its credit arm, which is overseen by Brigger, has grown, though not as fast as rivals such as Blackstone. Credit-based assets under management grew from $24 billion at the time of SoftBank’s purchase to $42 billion currently.

The group invested heavily during the pandemic and has launched several strategies for litigation finance, intellectual property and investments for wealthy individual investors. Fortress is also raising new flagship funds for “opportunistic” investments and those targeting non-performing loans in Europe.

Brigger said Fortress’s careful approach to attracting new properties will be an advantage in recent years as high rates have caused problems for many competitors.

“The opportunity hasn’t really been there in the last 10 years,” Brigger said of debt-based investment opportunities. “But there are some firms that have become incredibly large at the wrong time in the cycle.

“I think we will grow up in an environment like this. I think the firms that got huge in credit and mezzanine credit may live to regret it.

A sharp credit contraction due to the banking crisis and rising interest rates will trigger a wave of defaults, said Pete Brigger, co-founder of Fortress Investment Group, which was sold on Monday by SoftBank to an arm of Abu Dhabi’s sovereign wealth fund Was. Property manager’s own staff.

In an interview with the Financial Times, Brigger said the expected market turmoil created the best opportunity for distressed property investors since the 2008 financial crisis. Thus, it was a good time for Fortress employees to buy the firm, which specializes in distressed loans and other debt-based investment strategies and has $46bn in assets.

“The amount of credit that is in the world right now is getting smaller every day. , , It has become difficult for companies to take loans. The banking system itself is also experiencing a restructuring as fractional reserve banking no longer operates in its current form,” Brigger said.

“Asset values ​​have taken a hit, especially in real estate, growth equity and venture capital,” he said.

On Monday morning, SoftBank announced it was selling the US-based investment group to Mubadala Capital, an arm of Abu Dhabi’s sovereign wealth fund and Fortress Management.

Mubadala would buy 70 percent of the fort, while insiders like Brigger would buy the remaining 30 percent. Fort employees will control the company’s board and have the potential to become majority owners in the coming years depending on the group’s financial performance.

While terms of the deal were not disclosed, the Financial Times previously reported that Mubadala and Fortress Management would pay up to $3 billion, less than the $3.3 billion SoftBank paid to take the firm private in 2017. Fortress and Mubadala declined to comment on pricing. deal.

SoftBank’s acquisition of Fortress in 2017 came as founder Masayoshi Son sought to create an asset management arm within the Japanese investment conglomerate. But SoftBank’s huge interest in Chinese e-commerce giant Alibaba led US regulators to rule in 2018 that the two firms could not be integrated.

The arms-length partnership has been “perfectly good”, Bridger said, but once SoftBank started raising its Vision Fund, “we became less interesting to them” and were “not strategic”.

In August, SoftBank said it would consider selling Fortress as investment losses from its Vision Fund mounted.

“They were interested in selling for their own particular reasons,” said Brigger, who noted the investment opportunities to come made it “a very good time to buy a company like ours.”

During sale talks, Fortress told its investors that it was “in control of its own destiny” and could be sure that the structure of the deal would not reduce investment performance, the FT previously reported.

The purchase will create an opportunity for all Fortress employees to own a portion of the group and encourage succession planning. Brigger and Fortress co-founders Wes Edens will step down as co-CEOs, while managing partners Drew McKnight and Joshua Pack will become co-CEOs.

The succession is meant to provide more opportunities for a new generation of Fortress investors to take leadership positions, Bridger said, who will become chairman, oversee personnel issues and remain on Fortress’ investment committee.

“I might start my own fund within the firm. . . I’m certainly not retiring to play golf,” Brigger said. “I probably wouldn’t have final say on 400 emails a day.”

Edens, who led Fortress’ private equity business, will continue to oversee legacy investments such as the 2007 acquisition of Florida-based Rail Line, which has been converted into a high-speed commuter rail network called BrightLine.

Fortress was the first large private capital firm to go public, listing its shares in early 2007. This set off a wave of similar offers from the likes of Blackstone, KKR, Apollo and Carlyle, which eventually went public.

But Fortress’ buyout arm struggled during the crisis as highly profitable deals such as its acquisition of ski operator Intrawest were struck. Since the crisis, Fortress’ private equity business has not raised any new buyout funds.

Its credit arm, which is overseen by Brigger, has grown, though not as fast as rivals such as Blackstone. Credit-based assets under management grew from $24 billion at the time of SoftBank’s purchase to $42 billion currently.

The group invested heavily during the pandemic and has launched several strategies for litigation finance, intellectual property and investments for wealthy individual investors. Fortress is also raising new flagship funds for “opportunistic” investments and those targeting non-performing loans in Europe.

Brigger said Fortress’s careful approach to attracting new properties will be an advantage in recent years as high rates have caused problems for many competitors.

“The opportunity hasn’t really been there in the last 10 years,” Brigger said of debt-based investment opportunities. “But there are some firms that have become incredibly large at the wrong time in the cycle.

“I think we will grow up in an environment like this. I think the firms that got huge in credit and mezzanine credit may live to regret it.