Glendon Capital Management, Led By Several Ex-Barclays Members, Reveals Top Stock Picks for Q3

Glendon Capital Management L.P. was launched in April 2013 by Matthew Barrett, the former head of distressed debt and special situations investing at Barclays, as well as former Barclays Asset Management Group managing directors Holly Kim, Brian Berman and Eitan Melamed. The California-based asset manager, which reportedly wrapped up its $1 billion-debut fund in late 2014, predominantly invests in distressed securities and employs an event-driven investment approach.

Glendon Capital primarily seeks to invest in stressed and distressed company securities, post-reorganization securities, downgraded securities, tax-exempt bonds, asset-backed securities, as well as special situations such as company liquidations and rescue financing. Prior to joining Barclays, Mr. Barrett, Mr. Berman and Ms. Kim had also worked at Howard Marks‘ Oaktree Capital Management, as managing directors of its distressed debt platform. Distressed debt specialist Glendon Capital oversees a $314.44 million-portfolio as of the end of the second quarter, up from a value of $238.27 million in holdings at the end of the first quarter. With that in mind, let’s have a look at Glendon Capital’s five-largest equity holdings as of the end of June.

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#5. American International Group Inc. (NYSE:AIG)

 – Shares Owned by Glendon Capital Management (as of June 30): 181,500

 – Value of Glendon Capital Management’s Holding (as of June 30): $9.60 Million

Glendon Capital Management did not make any changes to its 181,500-share stake in American International Group Inc. (NYSE:AIG) during the second quarter. The shares of the U.S. insurer surged earlier this week after the company released better than expected earnings for the second quarter and announced plans to repurchase an additional $3.0 billion worth of AIG stock. AIG laid out a game plan in late-January to create a leaner, more profitable and focused company after well-known activists Carl Icahn and John Paulson demanded AIG split itself into three separate companies. AIG’s second quarter net income increased to $1.9 billion from $1.8 billion reported a year earlier, as the insurance giant continues to shrink its business operations and enhance efficiency. AIG shares are 6% in the red thus far in 2016. Stephen J. Errico’s Locust Wood Capital Advisors owns 582,522 shares of American International Group Inc. (NYSE:AIG) as of the end of the second quarter.

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#4. Atlantica Yield PLC (NASDAQ:ABY)

 – Shares Owned by Glendon Capital Management (as of June 30): 985,535

 – Value of Glendon Capital Management’s Holding (as of June 30): $18.31 Million

The distressed debt specialist upped its position in Atlantica Yield PLC (NASDAQ:ABY) by 11% during the three-month period ending June 30, to 985,535 shares valued at $18.31 million on June 30. The Spanish renewable energy company that owns, manages and acquires renewable energy, conventional power, electric transmission lines, and water revenue-generating assets has recently been engaged in debt talks with its creditors to avoid becoming Spain’s largest bankruptcy ever. In late-March, Reuters reported that Atlantica Yield managed to win the backing of approximately 75% of its creditors to restructure its $10.5 billion debt load, with the company appearing to be on track to reach an agreement with lenders and bondholders to avoid bankruptcy. Atlantica Yield reported revenue of $206.4 million for the first quarter of 2016, up by 74% year-over-year. The company’s stock has gained 2% year-to-date. David Tepper’s Appaloosa Management had 6.37 million shares of Atlantica Yield PLC (NASDAQ:ABY) in its portfolio at the end of March.

The second page of this article will reveal three other stocks favored by Glendon Capital Management.

#3. Ally Financial Inc. (NYSE:ALLY)

 – Shares Owned by Glendon Capital Management (as of June 30): 1.84 Million

 – Value of Glendon Capital Management’s Holding (as of June 30): $31.33 Million

The California-based asset manager increased its exposure to Ally Financial Inc. (NYSE:ALLY) by 207,500 shares during the April-to-June period, ending the second quarter with 1.84 million shares valued at $31.33 million. The upped position accounted for nearly 10.0% of the value of the investment firm’s equity portfolio. Ally Financial, the former financing arm of General Motors Company (NYSE:GM), focuses on two primary markets: auto-lending and direct online banking. The diversified financial services firm recently reported better than expected earnings and revenue growth despite experiencing a decline in auto originations. Earlier this year, Ally Financial acquired online brokerage TradeKing Group for approximately $275 million, expanding its existing portfolio of offerings by adding brokerage and wealth management services. The digital wealth management market is anticipated to reach $7 trillion by 2020. Ally Financial shares are down by 3% in 2016. Andy Redleaf’s Whitebox Advisors reported owning 890,450 shares of Ally Financial Inc. (NYSE:ALLY) as of June 30.

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#2. CF Industries Holdings Inc. (NYSE:CF)

 – Shares Owned by Glendon Capital Management (as of June 30): 2.14 Million

 – Value of Glendon Capital Management’s Holding (as of June 30): $51.48 Million

The investment firm founded by several former Barclays managing directors boosted its stake in CF Industries Holdings Inc. (NYSE:CF) by 1.52 million shares during the second quarter, to 2.14 million shares. The shares of CF Industries, one of the largest manufacturers and distributors of nitrogen fertilizer in the world, are down by 39% year-to-date due to lower nitrogen prices, which have been pressured by China’s fast-growing exports of urea, plus new production capacity in North America. Earlier this year, the U.S. manufacturer of nitrogen fertilizer and its Dutch rival OCI N.V. terminated their multi-billion-dollar merger agreement after the U.S. Treasury imposed new tax rules to hinder inversion deals. CF Industries was set to combine with the European, North American and global distribution businesses of OCI N.V. and become a subsidiary of a new holding company domiciled in the Netherlands. Ken Fisher’s Fisher Asset Management was the owner of nearly 95,000 shares of CF Industries Holdings Inc. (NYSE:CF) at the end of June.

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#1. Vereit Inc. (NYSE:VER)

 – Shares Owned by Glendon Capital Management (as of June 30): 6.82 Million

 – Value of Glendon Capital Management’s Holding (as of June 30): $69.20 Million

Its Vereit Inc. (NYSE:VER) holding was the largest in Glendon Capital Management’s pool of holdings at the end of the second quarter, constituting 22.0% of its equity portfolio’s value. The California-based asset manager did not adjust its 6.82 million-share Vereit position during the quarter, which was worth $69.20 million on June 30. The real estate investment trust (REIT) that owns and manages a diversified portfolio of 4,291 retail, restaurant, office, and industrial real estate properties has seen its market value grow by 32% since the beginning of 2016, reflecting the REIT’s successful turnaround plan after an accounting scandal harmed its reputation and damaged its credit rating several years ago. The REIT sold 145 owned properties and one property owned by an unconsolidated joint venture in the first half of 2016, for $494.8 million. The series of asset sales enabled Vereit to pay down $405 million on its revolving credit facility, which reduced the outstanding principal balance to $55 million as of the end of June. Keith Meister’s Corvex Capital had 43.96 million shares of Vereit Inc. (NYSE:VER) among its holdings at the end of the first quarter.

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Disclosure: None