SKW Funding, Bain Capital JV Eyes $1.3B in Distressed Debt

111 Wall St. Image via Google Street View

Anticipating desirable distressed debt opportunities in the post-pandemic environment, SKW Funding and Bain Capital Credit LP have formed a joint venture that will focus on special situation loan originations and sub- and non-performing note acquisitions. Over an investment period that will span the next several years, the partners plan to make $1.3 billion of acquisitions and loan originations.

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Prior to the announcement of the new partnership, SKW and Bain Capital commenced activity in their new joint venture with the purchase of an approximately $41.8 million note secured by an office portfolio in Austin, Texas. The two companies completed a second transaction with the origination of a $410 million loan secured by 111 Wall St., a 1.2 million-square-foot office property in New York City. SKW and Bain Capital were part of a lending consortium that provided borrowers Nightingale Properties and Wafra Capital Partners with acquisition and construction financing exceeding $500 million for the Class A Manhattan high-rise.

Geographically, the partners plan to target opportunities across the U.S., with an ongoing focus on metropolitan New York. At the sector level, they will continue to eye asset classes that suffered amid the pandemic, such as office properties in certain cases. The joint venture will also focus its efforts on special situation loan originations, including mezzanine and preferred equity investments.

The distressed test

In a prepared statement, Daniel Wrublin and Ayush Kapahi, principals & co-founders of SKW Funding, said that, given the current dislocations in the market, the partners anticipate that they will continue to find very attractive investment opportunities in the debt space. It appears the market may become increasingly fertile for their pursuits over their multi-year investment period.

“With recent economic data reflecting the strong recovery progress made across all U.S. sectors in 2021 thus far, including in job gains, consumer spending and manufacturing activity, and with US GDP expected to rebound meaningfully this year supported by increasing vaccination coverage and more segments of the economy re-opening, loan ‘cures’ should continue at a healthy pace for the rest of 2021,” according to an April 2021 research report from Trepp. “That being said, there will still be a sizable pipeline of distressed assets for opportunistic investors to bid on.”

SKW and Bain Capital’s formation of a new joint venture marks a second partnership platform for the companies; their first joint venture established in July 2019 has yielded the origination of nine transactions.