Barron's Extremely Bullish On Fortress Investment Group (FIG)
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This morning, Barron's penned a bullish piece on private-equity shop, Fortress Investment Group (NYSE: FIG), causing shares of FIG to bounce $0.52 or 19% to $3.01.
Like many have said before, Barron's thinks Fortress will benefit from purchases of distressed U.S. bank assets. Barron's wrote, "At its current price, buying shares of Fortress could be like buying a call option that CEO Wes Edens and company will exploit the Federal Reserve's $200 billion Term Asset-Backed Securities Loan Facility (TALF), a program designed to bail out credit-card and consumer lending."
If Fortress is successful at raising additional funds it will then be able to buy distressed assets with the government's no-risk capital to fund the buyouts at deep discounts to intrinsic value. Several years down the road, those investments could potentially swell in value as the economy turns around and assets approach market value.
As Fortress has been hit with redemptions, it has downsized its operations greatly. Fortress slashed its number of hedge-fund managers in Q4 from 25 to "just 3 or 4". Peter Briger, an executive at FIG, told investors that the layoffs have "simplified…the operation of our business greatly."
Michael Novogratz, who runs the Drawbridge fund, sounded fairly confident last month that he can attract new capital. "I do think that with a few more months of positive performance, [since] we have been in talks [with] lots of investors…that you will start to see inflows into the funds," he told analysts.
Fortress paid off $7.2 billion of debt of its portfolio companies last year. The balance of Fortress debt is mostly due not until 2012. Fortress' own company debt was refinanced in the fourth quarter with looser terms.
If Fortress AUM swells, that will lead directly to a rise in Fortress' incentive income, and investment income, both of which are obtained as a percentage of the profit on the firm's assets.
Fortress struggled in 2008, but with the stock trading below the market multiple, Barron's said it will not take much to please new investors in shares of Fortress' stock.
Like many have said before, Barron's thinks Fortress will benefit from purchases of distressed U.S. bank assets. Barron's wrote, "At its current price, buying shares of Fortress could be like buying a call option that CEO Wes Edens and company will exploit the Federal Reserve's $200 billion Term Asset-Backed Securities Loan Facility (TALF), a program designed to bail out credit-card and consumer lending."
If Fortress is successful at raising additional funds it will then be able to buy distressed assets with the government's no-risk capital to fund the buyouts at deep discounts to intrinsic value. Several years down the road, those investments could potentially swell in value as the economy turns around and assets approach market value.
As Fortress has been hit with redemptions, it has downsized its operations greatly. Fortress slashed its number of hedge-fund managers in Q4 from 25 to "just 3 or 4". Peter Briger, an executive at FIG, told investors that the layoffs have "simplified…the operation of our business greatly."
Michael Novogratz, who runs the Drawbridge fund, sounded fairly confident last month that he can attract new capital. "I do think that with a few more months of positive performance, [since] we have been in talks [with] lots of investors…that you will start to see inflows into the funds," he told analysts.
Fortress paid off $7.2 billion of debt of its portfolio companies last year. The balance of Fortress debt is mostly due not until 2012. Fortress' own company debt was refinanced in the fourth quarter with looser terms.
If Fortress AUM swells, that will lead directly to a rise in Fortress' incentive income, and investment income, both of which are obtained as a percentage of the profit on the firm's assets.
Fortress struggled in 2008, but with the stock trading below the market multiple, Barron's said it will not take much to please new investors in shares of Fortress' stock.
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