NEW YORK ( TheStreet) -- Blackstone ( BX) announced Thursday it will buy Harbourmaster Capital Management, a leveraged loan manager with roughly $11 billion in European sub-investment grade corporate and investment grade infrastructure debt. For Blackstone and its alternate business of managing debt funds -- called GSO Capital Partners -- it's a major push into European debt that roughly doubles the size of its European loan business. The purchase comes just as the market hit new lows for the year on mounting concerns over a Greek default and the liquidity of major European banks. According to data released by S&P LCD today, its European Leveraged Loan Index fell for the fourth consecutive month in September and posted its worst quarterly return since 2008 --when credit markets across the world were suffering from a post- Lehman Brothers freeze. With the S&P European Leveraged Loan index hitting 84.99 in September, its lowest level since December 2009, Blackstone saw falling prices as an opportunity. "It's a bit of a contrarian play," said Dan Smith, a senior managing director at Blackstone in a phone interview with TheStreet. Smith said with volatility building in Europe and a withdrawal of buyers of sub-investment grade debt, Harbourmaster will give Blackstone the firepower to make significant investments. "The banks are going to be sidelined for risk assets and non-investment grade credit...we want to be the guy that can write one of the biggest checks and as a result have a lot of influence," said Smith. Combined, the business will total $15.5 billion in high -yield European debt, a rough doubling of Blackstone's prior portfolio. After Harbourmaster's portfolio is added to Blackstone's existing business, the combined fund will total $45 billion in debt. According to a press release announcing the deal, the purchase will make Blackstone and its credit business one of the largest sub-investment grade loan investors in Europe as well as the United States. Harbourmaster's website says the company is "one of the largest participants in the primary market for European bank loans." The fund uses investors' money and financing to buy low-rated loans that are pooled together, secured by assets like the bank accounts, receivables and property of a debtor - and then sliced into new securities offering varying risk and return.
"I think you could loosely say it signals a vote of confidence for European corporate credit markets because I doubt
Blackstone would make a sizable acquisition if Steve Schwarzman and other BX executives thought that market was a complete mess," said Jason Weyeneth an analyst at Sterne Agee in an email to TheStreet. He added, "That said, it's probably a bigger vote of confidence in Harbourmaster's ability to successfully navigate the market to generate strong risk adjusted returns for investors and likely attractive acquisition terms." Weyeneth currently has a "neutral" rating on Blackstone's stock and a price target of $15 a share. Shares rose over 5% and high as $13.20 a share in afternoon trading. In August, investment firms Nat Rothschild and Ares Management made similar, but smaller purchases of loan fund managers. Terms of the purchase were not immediately announced and the sale is expected to be completed by early 2012. About the price paid, Blackstone's Smith added, "it wasn't a distressed sale." -- Written by Antoine Gara in New York