Despite Recent Turbulence, Angelo, Gordon’s David Roberts Sees “Opportunities in Private Equity"

The world of private equity has been in a shambles since the onset of the financial crisis, but some executives see that as an opportunity rather than a threat. Among them is David N. Roberts, senior managing director of Angelo, Gordon, who manages the firm’s private equity business. A 16-year veteran of the firm, Roberts also founded the firm’s opportunistic real estate area.

During a visit to campus recently, Roberts pointed out that while the government’s stimulus programs have not yet had a widespread impact, some opportunities are starting to open up that could ease the credit crunch. “The best government programs are the ones where the government is stepping into the financing markets, in a creative way, and trying to lower credit spreads,” he said. “For example, they have just started something called TALF, where they are making money available to make loans to help people like us buy triple-A rated securities. What that will do – it’s just really started – is to make other triple-A securities trade at lower interest rates. That will trickle through the economy to make credit more available.”

Roberts also noted that though opportunities do exist, they are rare. Each private equity firm has had to adjust to at least two trends in the market. “One trend is that most people have legacy portfolios, where they have companies they have to deal with and decide: Is this company worth nursing back to health? Is there a way of restructuring the balance sheet? How do I preserve value? Does it make sense to put capital in? A lot of private equity talent and energy is being devoted to that. The second trend is that the traditional leverage buyout is off the table, for now and for the foreseeable future. So when we’re looking at transactions, by and large, we’re looking at transactions that have no leverage, where you’re buying all equity. And therefore, you have to come up with prices and returns that make sense in that context. We’re finding some situations, but they’re few and far between.”

Click here for the full podcast and an edited transcript of the interview with David Roberts.