Highland Expands To Brazil, Launches CLO JV

Dec 22 2011 | 11:02am ET

Highland Capital Management is selling its European collateralized loan obligation business, but the hedge fund isn't abandoning the sector entirely.

Dallas-based Highland has turned its sights south, to Latin America. It has gone into business with three Brazilian firms to originate corporate loans for three funds, Bloomberg News reports.

Highland has launched an asset-management joint-venture in Brazil, Highland Brasilinvest Gestora de Recursos, with the Brasilinvest Group. Its three partners in the CLO drive are Banco Pine, Plural Capital and Quata Investimentos.

The venture is Highland's first foray into Latin America. Co-founder James Dondero told Bloomberg that "Brazil is our favorite emerging market" and that "Brazil's corporate credit market is in the early stages of development, where the U.S. was 10 to 15 years ago. Partners are asking us for our guidance and knowledge, the same way Highland helped develop the bank loan market in the U.S."

Highland's thesis is that Brail will grow in advance of the World Cup in 2014, when the country will host the world's biggest sporting event, followed by the 2016 Summer Olympics in Rio de Janeiro.

"There is a surge in major infrastructure projects, in part due to hosting the 2014 World Cup and 2016 Summer Olympics," Dondero said. "That contributes to the overall macro standpoint."

Earlier this month, reports surfaced that Highland was in talks with the Carlyle Group to sell its US$3 billion European CLO unit. Highland put the business up for sale earlier this year.

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