Will Debt Refinancing Wave Boost Funds Like Victor Khosla’s Strategic Value Partners

Strategic Value Partners, founded by Victor Khosla, manages $19 billion in funds which provide private credit to U.S. and European mid-size companies

(Photo: Victor Khosla, Strategic Value Partners.)

February 28, 2025

From 2009 to 2015, and during the COVID-19 pandemic of 2020 and 2021, central banks kept interest rates near zero in the United States and Western Europe. This enabled companies to borrow trillions of dollars in debt at very low interest rates, around 5% for ten year debt.

Now, many companies are having trouble re-financing the maturing debt since interest rates are far higher – the yield on ten-year U.S. government debt is currently around 4.25%. The re-financings, at around 9% to 12% in interest rates, pushes some companies to seek investors who can help them restructure their debt and avoid defaulting on their debt repayments. This offers good opportunities for funds investing in debt, including in private credit.

In December, a group of lenders, led by Strategic Value Partners (SVP) and Nut Tree Capital, restructured the finances of Wheel Pros, a Denver, U.S. based vendor of aftermarket vehicle enhancements. The business, which operates under the Hoonigan name, emerged from bankruptcy after eliminating about $1.2 billion of debt and securing an asset backed loan of $175 million.

Last year, Hornblower Group reduced its total debt by approximately $720 million, or more than 70%. Hornblower’s operations include dining and sightseeing cruises in more than 20 destinations in the U.S., Canada and the United Kingdom and the commuter ferry in New York City. As part of the financial restructuring, SVP acquired a majority of Hornblower. SVP and Crestview, a minority investor, put up $121 million in new financing for Hornblower.

Over the past year, the default rate on debt by companies in the U.S. is 5%, while it was 6.5% during the 2020-2022 Covid-19 pandemic, Victor Khosla, founder and chief investment officer of Strategic Value Partners, said on CNBC today. “We take control of businesses and look to fix them, improve them”

Based in Greenwich, Connecticut, SVP buys debt at steep discounts to face value. Also, as a private equity investor, it seeks to buy businesses, typically by avoiding paying high prices at auctions held by Wall Street brokers. Khosla’s team then seeks to improve the management and operations, including by investing more capital into the company. The typical holding period of investments, which are mostly illiquid, is three to five years.

SVP is currently raising its sixth fund, with a reported target of $6.5 billion. While there is no public disclosure about the specific performance of SVP’s funds, they “have consistently achieved first- and second-quartile performance rankings across various vintages and market cycles,” according to a memo from the Division of Investments, State of New Jersey.

In 2021, SVP raised $5 billion for its Fund V. SVP currently manages $19 billion in funds. Khosla’s team seeks to buy senior debt of North American and European mid-market companies that are fundamentally sound, but may be in financial distress. Its other investments include event-driven, deep value opportunities; private debt restructurings, and private equity funding. About 60% of investments are in special situations and the rest in real assets like real estate, infrastructure, airplanes, and power plants.

“We are really not a tech or a software focused firm…We are very much in the old economy businesses, service businesses, consumer brands,” Khosla told Barry Ritholtz of Bloomberg.

In November, for instance, SVP announced the purchase of Blanchardstown Centre, in north-west Dublin, covering 1.2 million square feet and housing more than 180 shops and restaurants. It attracts around 17 million visitors annually and has 5,500 parking spaces, making it one of Ireland's leading shopping malls.

Last year, SVP acquired Stuttgart, Germany based APCOA, a parking operator. It manages more than 1.8 million parking spaces at 13,000 locations in 13 European countries, for private and public real estate owners. APCOA also offers electric vehicle charging infrastructure. SVP is investing to increase APCOA’s automation and online customer service platform.

In 2001, Khosla founded SVP, raising $110 million, of which $100 million was from his former employer Moore Capital. The initial focus of SVP, was on investing in distressed debt and restructuring of businesses. Khosla expanded to Europe, setting up an office in London in 2004.

Earlier, Khosla worked at various Wall Street firms in New York. He ran MooreSVP, a joint venture with Moore Capital, 1999-2002. He joined Moore Capital in 1998. He served as President of private equity firm Cerberus Capital, 1998. Khosla managed a proprietary trading businesses at Merrill Lynch, starting with $100 million in 1993, which grew to $2 billion when he left in 1998. While at Citibank, 1989-1993, he set up the bank’s distressed debt business.

He also worked as a strategy consultant.at Booz Allen Hamilton. Khosla, 66-years-old, earned a Bachelor’s of Commerce from Delhi University, an MA in Economics from Vanderbilt University, and an MBA from the University of Chicago.

Since inception, SVP has invested in roughly 800 transactions totaling more than $50 billion, including more than $18 billion in Europe. Currently, SVP has operating control or influence over 15 businesses with about 100,000 employees. Europe typically accounts for a third to half of SVP’s portfolio.

The firm has over 200 employees, including approximately 100 investment professionals, mainly at offices in Greenwich and London; it has additional offices in New York and Tokyo.

Last month, Strategic Value Partners (SVP) completed its $1.1 billion purchase of Revelyst, a Providence, Rhode Island, U.S., based designer and manufacturer of performance gear and precision technologies.

Also, in January, SVP announced a €200 million preferred equity investment to help fund the growth plans of Sweden’s Bjelin Group. Bjelin, owned by the Pervan family, has a licensing business for flooring and furniture applications and produces flooring and furniture in Sweden and Croatia. It also owns a veneer, flooring, and furniture manufacturing business with production facilities in Croatia.

Last year, speaking to Semafor, Khosla said, “The equity markets are strong. But our pipeline (of investing in distressed assets) has quadrupled over the last two years. I’ve been doing this for 30 odd years, and I’ve never seen those two things together. Picture a duck gliding across a pond that looks kind of serene. And underneath, you don’t see feathers coming off them.”

In September Khosla told Barry Ritholtz of Bloomberg, “you’ve just got to constantly be ready to learn, to evolve. You can’t get stuck…if I was to give advice to somebody who goes down this journey, it is to have a lot of people around you who can, not just in your firm, but outside your firm…people you can trust, you can talk to, who can coach you, who can make you think, because you are in an evolutionary journey to grow up, to be a leader in this business.”

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