At 76, Wilbur Ross is showing no signs of slowing down. The distressed asset investor, who manages over $7 billion in assets through his New York-based investment firm WL Ross & Co, is looking to raise over $2 billion by floating a new PE fund. The reason is not that hard to fathom — an investor who made his billions buying stressed assets across steel, banks, coal, auto and textiles is now rubbing his hands in glee at the prospect of picking up stocks of distressed small and mid-cap Canadian and US energy companies.
The sudden meltdown in crude oil, which hit an four-year low of $88, has had a debilitating impact on these companies. “We’re looking for things that are idiosyncratically distressed, where we believe the long-term fundamentals are in place,” Ross has been quoted as saying. The rationale for zeroing on these companies is Ross’ belief that, in the long run, oil has to recover and that would mean that today’s out-of-favour stocks will get re-rated.
While Ross has an uncanny knack for hitting the right notes in distressed investing, not all his plays have been a home run. In case of steel, Ross merged five bankrupt US steel companies into what was called as the International Steel Group, later sold to Mittal Steel in 2004 for $4.5 billion, giving Ross a 13x return on his investment. But Ross’ foray into textiles ended in an anti-climax.
In 2003, he entered the business by buying out one of America’s biggest textile companies, Burlington Industries (which went bankrupt in 2001) and Cone Industries. He merged both these companies to form a new entity, the International Textile Group (ITG). Three years later, Ross merged ITG with another company, Safety Components International (SCI), a publicly listed airbag maker that was a part of his portfolio. The merger resulted in a lawsuit from SCI shareholders, who alleged that Ross used the merger to bail out ITG by shelling out $150 million for a ‘worthless’ company. Ross settled the suit late last year for $81 million. In other words, the textile bet did not quite work out for the legendary investor.
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