Marathon races to buy distressed assets

NEW YORK (Reuters) - Marathon Asset Management, an $11.5 billion hedge fund manager specializing in distressed assets, is seeing the best investment opportunities in years as the credit and equity markets sour, its chief executive told the Reuters Summit on Wednesday.

"We think it's the single greatest opportunity for distressed investing in 17 years," said Bruce Richards, CEO of the fast-growing firm.

He called the current market "a confluence of events that hasn't happened since 1991," when widespread savings bank failures led to the creation of the Resolution Trust Corp., a government-backed entity that bought troubled loans.

Richards, a former Smith Barney and DLJ managing director who founded Marathon in 1998, said he believes the corporate debt default rate, now in the 1 to 2 percent range, will quadruple over the next year and that 150 to 160 U.S. and European companies will file for bankruptcy by the end of 2009.

Such dire predictions have prompted Marathon and other so-called vulture investors to step up buying across a spectrum that includes troubled residential and commercial loans, bank debt, "leveraged loans" backing private equity buyouts and other assets, many of which are trading well below par, or face value.

In particular, Richards said Marathon has purchased more than $1 billion par value in residential real estate loans in recent months and expects to purchase another $1 billion or more this year. He said his firm is also long multifamily rental assets on the assumption that more homeowners will be forced into the rental market.

"We're buying these loan packages at 30, 40 and 50 cents on the dollar," said Richards, whose firm last year bought a Phoenix, Arizona-based residential loan serving firm called Marix, which is now focused on loan workouts.

"There are 4.8 million homes for sale in the U.S., triple the normal supply, and at least 1 million more homes facing foreclosure," said Richards. "We've only gotten halfway through the cycle."

(Reporting by Dane Hamilton; Editing by Gary Hill)