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Saturday, 21 January 2017
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Oct 26 2006 | 7:12am ET
A new firm trying to put a happier face on distressed debt is hoping to raise up to $10 million in seed money for its first fund.
Westcastle, based in the growing hedge fund center of Dallas, plans to offer creditors “friendly restructuring,” according to CEO Tim Cox, in an effort to avoid costly litigation.
“If you approach the debtor and they feel like you’re willing to work it out with them and understand their situation, you’re able to do more than the original creditor,” he says. Cox says he is often able to recoup five times his investment.
The fund will also invest in distressed credit card debt, offering debtors a new credit card with their old balance transferred over. As they pay down the debt, they get access to the newly-available credit.
“We’re actually doing people a favor,” Cox says, by giving them a means to repair their credit score. “And the consumer is happy because they get another credit card.” For the fund’s part, it gets a big upfront payment, and Cox says fewer than one-third of debtors default on their new cards.
The six-month-old firm’s chief financial officer, Greg Vint, has been in discussions with family offices and high net-worth individuals.