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Former Prudential P.L.C. Exec To Help Institutions With Distressed Investments

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NU Online News Service, July 10, 12:23 p.m. – F. John Stark III is starting Water Tower Capital L.L.C., Chicago, a firm that will help life insurers, banks, mutual fund companies and other institutions manage investments in companies that are facing severe financial problems.

The firm will try to recover as much from the distressed companies’ stocks, loans and debt securities as possible when the issuers go through corporate restructurings and bankruptcy proceedings.

Stark, 42, spent 10 years as head of special investments for PPM America Inc., Chicago, the North American portfolio management arm of Prudential Corp. P.L.C., London, a large British insurer that is sometimes confused with a separate U.S. company, Prudential Insurance Company of America, Newark, N.J.

Stark managed $900 million in distressed debt funds for PPM; a $1.2 billion workout portfolio for another Prudential subsidiary, Jackson National Life Insurance Company; and a $1.5 billion PPM fund that provided “asset-based” loans for troubled companies.

Institutional investors are probably going to need more help with distressed investments, because the dollar value of bond defaults reached $30.3 billion in 2000, and the percentage of bonds in default reached 5.1%.

The relative default rate was the highest in 10 years, and the dollar value of the defaults was the highest ever, Stark says.

The average recovery rate on defaulted bonds was only 26%. That’s the lowest recovery rate since 1990, Stark says.

Stark has a bachelor’s degree from Wabash College and a law degree from Vanderbilt University.