US Vulture Funds Head to Europe

By Emily Thornton

As the Continent's economy slows, American distressed-debt and workout funds go on a hunt for wounded businesses.

American vulture investors are swooping down on Europe. Attracted by the scent of rotting valuations, such high-profile players as Wilbur L. Ross Jr. in New York and Lone Star Funds in Dallas are starting to do deals across the Continent. On Aug. 18, Ross spent $70 million to acquire an 86 percent stake in struggling British auto supplier Wagon. Days later, Lone Star took over IKB Deutsche Industriebank, a troubled German bank, for $150 million. And such heavyweights as Oaktree Capital Management and Avenue Capital Group are raising billions to invest in European assets in coming months.

As an arena for distressed-debt investing, in fact, Europe is rising to the top of the list. Having largely ignored the region until recently, investors are raising $7 billion worldwide this year to buy distressed European debt, estimates London research firm Preqin (Private Equity Intelligence). Of that, U.S. players are raising $5 billion.