INVESTMENT MANAGEMENT

INVESTMENT PROCESS
Longacre uses fundamental research and analysis to identify attractively priced investments of companies that have filed for bankruptcy or are under severe financial stress. We invest primarily in bank debt, bonds, trade claims and equities with an emphasis on secured debt; our analytical abilities and resources devoted to trade claims represent a niche strength. Our principals and analysts source new ideas through direct sector/industry research, the media, public filings, broker/dealers and numerous professional relationships. The firm holds frequent internal research meetings in which principals and analysts present new ideas and discuss developments in existing positions. We apply fundamental valuation and qualitative analysis to determine relative value and prospective return on investments throughout a company’s capital structure. We may invest in more than one segment of the company’s capital structure if the opportunity is appropriate relative to risk while monitoring and assessing the variety of scenarios through which a company may emerge from bankruptcy, pursue a liquidation or complete a balance sheet restructuring. Trade claims represent a particular Longacre niche.

We are not active traders; in general, our goal is to realize value by holding investments through the completion of a bankruptcy proceeding, debt restructuring or other significant balance sheet transition. Longacre’s principals, in consensus, make all buy and sell decisions. Longacre has a long-bias but will make short investments (up to 10% of the portfolio) to add return or, on occasion, for purposes of hedging. We do not use leverage as an investment strategy.
 
INVESTMENT STRATEGY
Longacre is not an active trader. Although our holding period is typically between six months and two years, the duration of a bankruptcy or debt restructuring can vary widely. Also, in certain situations, Longacre invests in obligations of stressed or distressed companies that may not go through a formal debt restructuring. Such companies may resolve their financial or operational difficulties through means such as the sale of a strategic asset, an operational re-organization or an improvement in market conditions, the timing of which may also cause our holding period to vary.

We periodically hedge interest rate exposure by going short government bonds. We may use derivatives (primarily CDS) as both a hedging and an investment tool. Generally, we hedge non-U.S. currency exposure through short forward contracts at time of settlement and dynamically thereafter. Our equity positions derive primarily as distributions following a portfolio company’s emergence from bankruptcy.

For additional investment information please fill out our form on the Contact page.