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• Case | HBS Case Collection | August 2018 (Revised April 2019)

  Oaktree: Pierre Foods Investment

  Victoria Ivashina and Mike Harmon

  This case is a setting to discuss “loan to own” investment strategy that is often pursued by distressed investors. The aftermath of the 2007 financial crisis left many companies with poor liquidity and limited ability to obtain credit. One of these companies was Pierre Foods, a producer and distributor of processed and precooked protein products that had experienced several years of promising sales growth and held a leading market position. Despite this, 2007 saw Pierre foods adversely affected by a spike in production costs and unsustainably high leverage. This made Pierre Foods an attractive opportunity for Oaktree Capital Management, allowing them to employ its strategy of investing in distressed debt securities with the goal of leading a restructuring during which their debt investment would be converted into a controlling equity stake. The challenge of executing “loan to own” strategy is being able to identify ahead of the restructuring the debt layer that stands to become equity (the so called “fulcrum security”). Overall, this case can be used to understand unique elements of a representative distressed investment. It can also be used as a platform for discussing sources of value and risks associated with distressed investing.

  Keywords: distress investing; Investment; Debt Securities; Strategy; Restructuring;

  Citation:

  Ivashina, Victoria, and Mike Harmon. "Oaktree: Pierre Foods Investment." Harvard Business School Case 219-018, August 2018. (Revised April 2019.)  View Details

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• Article | Review of Financial Studies | April 2019

  Private Equity and Financial Fragility during the Crisis

  Shai Bernstein, Josh Lerner and Filippo Mezzanotti

  Do private equity firms contribute to financial fragility during economic crises? We find that during the 2008 financial crisis, PE-backed companies increased investments relative to their peers, while also experiencing greater equity and debt inflows. The effects are stronger among financially constrained companies and those whose private equity investors had more resources at the onset of the crisis. PE-backed companies consequentially experienced higher asset growth and increased market share during the crisis.

  Keywords: Private Equity; Financial Crisis; Performance; Financial Condition;

  Citation:

  Bernstein, Shai, Josh Lerner, and Filippo Mezzanotti. "Private Equity and Financial Fragility during the Crisis." Review of Financial Studies 32, no. 4 (April 2019): 1309–1373. (Earlier version distributed as National Bureau of Economic Research Working Paper No. 23626 and Harvard Business School Working Paper No. 18-005.)  View Details

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• Case | HBS Case Collection | January 2019 (Revised March 2019)

  Should a Pension Fund Try to Change the World? Inside GPIF's Embrace of ESG

  Rebecca Henderson, George Serafeim, Josh Lerner and Naoko Jinjo

  In the fall of 2018, Hiro Mizuno, the Chief Investment Officer (CIO) of GPIF, the Japanese Government Pension Fund, was reflecting on his efforts to integrate Environmental, Social and Governance (ESG) issues into every aspect of GPIF’s portfolio. His efforts ranged from constructing new stock market indices based on ESG data, changing the compensation and incentives of active investment managers and passive funds, pushing for more corporate sustainability reporting and integrated reporting, and establishing collaborations with other asset owners to drive systems level change. He was convinced that the only way to meet his responsibilities to his beneficiaries was to improve the performance of the entire economy through a focus on improving corporate governance, increasing inclusion in the workplace and gender diversity and reducing environmental damage and progress towards tackling climate change. The early results from his efforts were promising, but was there more he could do?

  Keywords: pension funds; ＂ESG (environmental, social, governance) performance; Investment Funds; Environmental Sustainability; Social Issues; Governance; Leading Change; Economy; Performance Improvement; Japan;

  Citation:

  Henderson, Rebecca, George Serafeim, Josh Lerner, and Naoko Jinjo. "Should a Pension Fund Try to Change the World? Inside GPIF's Embrace of ESG." Harvard Business School Case 319-067, January 2019. (Revised March 2019.)  View Details

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