BlackRock Inc., the biggest publicly traded U.S. asset manager, asked investors in a $3 billion fund that owns leveraged bank loans to commit more equity after debt prices fell.
The move will reduce leverage in the BlackRock Credit Investors fund, helping maintain capital ratios, said Ron Schmitz, chief investment officer for Oregon's state pension fund, which yesterday agreed to invest an additional $72 million. The pension trustees approved the infusion at an emergency meeting conducted by telephone.
The decline in loan prices is threatening funds that were set up to buy the assets. Highland Capital Management LP is shutting its flagship Highland Crusader Fund and another hedge fund after losses on high-yield, high-risk loans and other types of debt, according to a person with knowledge of the decision.
Banks began selling loans at losses after contagion from the collapse of the U.S. subprime-mortgage industry shut down credit markets worldwide last year. Leveraged loans are rated below Baa3 by Moody's Investors Service and BBB- by Standard &Poor's and are used to fund private-equity acquisitions.
Prices fell to a record low of 66.05 cents on the dollar today, down from 88.45 cents on Sept. 2, and from above face value in June 2007, according to a composite of 15 large loans tracked by Standard & Poor's Corp
. The Oregon Public Employees Retirement Fund initially agreed to invest $200 million in BlackRock Credit Investors in September 2007, said Ley Garnett, a spokesman for the state Treasury.
BlackRock is trying to raise $3 billion for a second fund to buy bank loans, one of several investment pools the firm has started to benefit from market upheaval. Brian Beades, a spokesman for BlackRock, declined to comment further.
Source:http://www.bloomberg.com/apps/news?pid=20