Marathon CEO sees opportunity in banks’ woes

April 9, 2008

richards.jpgMarathon Asset Management, an $11 billion hedge fund and private equity group, is snapping up banks’ assets “across the spectrum” at a big discount, from residential mortgages to commercial real estate loans to leveraged loans, Chief Executive Bruce Richards tells the Reuters Hedge Funds and Private Equity Summit.

Richards seems to have a keen sense of how badly the banks want to unload such distressed assets, giving him a strong negotiating position to push for the lowest possible price.

“They’re sitting behind closed doors and figuring out right now with regulators and with their own internal risk committees and treasury departments how they fund themselves in today’s market environment and how they get risk down,” he says.

Going forward — and given the generous funding terms the Federal Reserve is now offering them — banks actually have a great opportunity to make money on new loans, he says.

But to do that, it’s crucial that they free up space on their balance sheets. That’s why Citigroup’s agreement to sell $12 billion in loans is likely to be just one of many such deals by a variety of banks.

“Right now, they have to get through the problem assets that are on their balance sheet to get that more manageable and get their leverage down,” Richards says. 

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