Catalyst has a highly disciplined investment approach in which it utilizes a proven and replicable process, based on its proprietary and internally developed process-focused software. Catalyst’s investment process ensures each potential investment is fully, properly and objectively analyzed before any position is acquired, and allows the Firm to follow potential situations for extended periods of time before building a position and to efficiently allocate time to the most attractive opportunities. The Firm believes that this approach permits it to be patient, judicious and objective in its investment analysis. The Firm’s disciplined investment approach results in it pursuing investments in which it believes there is an asymmetric risk / return profile characterized by limited downside (targeted collateral value relative to cost of 20-25% in excess of liquidation value in the case of senior secured debt, or of going concern value, in the case of subordinated debt) with significant upside potential.
The key aspects of this strategy include:
- Sourcing attractive investments through Catalyst’s network of contacts;
- Analyzing the opportunity for Catalyst to exercise operating control or significant influence in the reconstituted business on a go-forward basis;
- Identifying the key securities needed to control the capital structure (the “fulcrum security”) and recognizing opportunities to invest around such securities (“ringfencing”);
- Acquiring a control or influence position at prices below liquidation or going concern value;
- Ringfencing around the fulcrum security in order to increase collateral and / or returns, where possible;
- Influencing the outcome through the bankruptcy / restructuring process; and
- Adding value through operational involvement, if or when Catalyst successfully obtains control or influence.