Angelo Gordon Steel Turnaround

Chidem Kurdas

When Angelo, Gordon & Co. lent to United States Steel Corp. in the Spring of 2009, the steel maker was in serious trouble. The steel business slumped in tandem with construction. US Steel’s stock went into a tailspin after hitting a high of $187 in late 2008. It has not recovered; it is fluctuating around $60 now.  Yet Angelo, Gordon did well with the US Steel notes.

Steel, of course, is cyclical. It went into an up cycle in the second half of 2010 and certain products are said to be scarce. An analyst expects M&A to accelerate in distribution and processing. “There are currently at least six major middlemen on the hunt for acquisitions,” she says.

A year-and-a-half ago, the US Steel bonds Angelo, Gordon bought were valued at around $29 million. Recently, the notes were valued at more than $ 63 million. This certainly does not look like a near-distressed situation, despite the dire conditions when the debt was issued.

Angelo, Gordon is best known as a distressed debt investor, in particular as a lender to Tribune Co. and party to the bankruptcy and various travails of that media company.

In fact the private equity-hedge fund firm is in large part a real estate specialist that makes a lot of property investments, for the most part successfully. By contrast, its decisions to lend to media businesses appear to be questionable. Steel, though volatile, looks like a much better bet.

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