Altana’s distressed opportunities hedge fund sizes up equity and credit trades in “forgotten” oil services
Altana Wealth, the credit, currency and special situations-focused hedge fund led by former Trafalgar Asset Managers co-founder Lee Robinson, is circling the restructuring and consolidation opportunities arising from the rebound in demand for oil and gas post-Covid.
The firm’s Altana Distressed Opportunities Fund, which seeks out investment ideas in neglected corners of capital markets, is zeroing in on the offshore oil and gas services sector.
Steffen Dietel and George Yacoub Nadda, co-portfolio managers of the strategy, said this week that the post-pandemic industry reboot will serve up opportunities “rarely seen” in their investment careers.
The fund aims to capitalise on themes emerging within what Altana calls an “over-levered but operationally essential” sector, which over the past decade has seen a debt-financed building boom give way to sharp decline, an “unprecedented” drop in capex following the 2014 oil price collapse, and subsequent “timid” recovery.
Dietel pointed to a “super boom-and-bust cycle” within the sector, which faces the added complexity of a global pandemic and energy transition. Specifically, Covid-19, ESG trends, and energy transition has seen many investors abandon the sector. This, Altana said, has turned offshore oil and gas services into a “forgotten” industry which offers “massive upside” in both equity and distressed credit.
Underpinning this thesis is an anticipated rebound in oil demand to pre-Covid levels set against a significant shortfall in oil supply.
“We think a ramp-up in capital investment is necessary to deal with this situation – that is a key tenet of our strategy going forward,” Dietel added.
The fund invests in the equity and debt of those companies best positioned to survive in this new environment. The strategy’s equities focus targets those companies that have “massively de-levered” balance sheets which can weather the downturn and drive consolidation in the sector. The credit element meanwhile zeroes in on attractive restructuring opportunities and special situations.
Among the strategy’s key bets are as a first lien bondholder in Jacktel – owner of Haven, a single jack-up accommodation rig in the North Sea – where the bond is currently trading in the high-teens, as well as in drilling company Valaris, a restructuring play, and Tidewater, the largest listed offshore vessel name, a key industry consolidator and the fund’s biggest overall position.
The strategy is targeting returns of around 3x over the next two-to-three years. So far, the fund has generated gains of more than 50 per cent year-to-date.
Established in 2010 by hedge fund veteran Lee Robinson – who earlier co-founded event driven hedge fund Trafalgar Asset Managers and helped build Tudor Investment Corp’s risk arbitrage business – London and Monaco-headquartered Altana today manages a range of niche alpha strategies spanning credit, event driven, systematic and cryptocurrencies, with around USD700 million in assets under management.