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TUESDAY, FEBRUARY 9, 2010
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Lone Star Buys Big at Mortgage Fire Sale

Texas fund grabs $6.7B in Merrill castoffs, is hungry for more

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(Newser) – Lone Star Fund is looking to profit from the castoffs of the credit meltdown, buying billions of marked-down assets and betting on just some of them to rebound, reports the Wall Street Journal. The Dallas-based private-equity firm run by John Grayken has closed a deal on $6.7 billion in Merrill Lynch mortgage backed assets once valued at $30.6 billion.

With Merrill financing 75%, Lone Star has some $8 billion to continue its bargain shopping after wrapping up a $10 billion fundraising push last week for its two newest funds. Grayken honed his investment strategy for Lone Star "while resolving bad debt during the savings-and-loan crisis in the 1980s," the Journal notes, adding that the fund made its name by buying distressed companies and turning them around.

Lone Star bought most of Korea Exchange Bank or KEB, in 2003, and is now selling it for as much as $5 billion in profit.
Lone Star bought most of Korea Exchange Bank or KEB, in 2003, and is now selling it for as much as $5 billion in profit.   (AP Photo)
John Grayken, the chairman of Dallas, Texas-based Lone Star Funds.
John Grayken, the chairman of Dallas, Texas-based Lone Star Funds.   (AP Photo)
John Grayken, the chairman of Lone Star Funds.
John Grayken, the chairman of Lone Star Funds.   (AP Photo)
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Merrill Lynch • CDO • Lone Star • mortgage debt • private equity firms

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