Daniel Posner, the head of opportunistic credit at Golub Capital, recently sat down for an interview with Bloomberg Brief‘s Simone Foxman. The two spoke about the investing strategy of the fund, why he’s a buyer of energy sector debt as well as the reasoning behind some of his other investments.
Daniel Posner on Golub’s strategy
Daniel Posner says Golub is pursuing “an event-driven, long-short opportunistic credit strategy.” He points to three factors that differentiates Golub from other funds: First, a relatively small size allows Golub to focus on smaller situations. That allows investments in companies that aren’t widely followed by the market. Moreover, in large capital structures, there might be a smaller bond issue in size that might have a unique angle such as improved guarantees or different covenants. He also notes those kinds of situations are typically too small for a large, multi-billion-dollar fund.
Second, Golub Capital is involved in more than 2,000 middle-market deals a year. The firm lends to hundreds of middle market companies, which gives us some good investment prospects. Third, Golub shorts single-name bonds instead of shorting credit through index products.
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Buying cheap energy sector bonds
Daniel Posner says he likes “being the liquidity provider on the other side of trades with forced sellers.” He comments that the sell off in oil and gas “…has been fantastic for us. We’ve been able to be a liquidity provider, buying some bonds that fell dramatically at prices we think are cheap.”
He highlights that a number of top-quality energy firms have sold off to very attractive levels as investors have pulled out of the sector, and he’s acted on several great buying opportunities.
In the interview, Daniel Posner noted that many analysts estimate that around 20 to 30% of the industry only has six to 15 months of liquidity. “However, we believe that many of these companies could sell assets like non-strategic real estate. While the prices may not be what they would have liked, they can still get liquidity. We believe that private equity firms sponsoring these companies could, in some situations, provide additional capital to help these companies shore up the balance sheet.”