Canyon Capital is recession-ready as bond markets look vulnerable

The Canyon Distressed Opportunity Funds II reported gains from a post-reorganization gaming company during the second quarter. In their second-quarter letter to investors dated Sept. 30, which was reviewed by ValueWalk, the Canyon Capital team said the company was their biggest positive contributor after announcing its sale to a strategic acquirer. The deal included a bigger-than-expected cash component and plans to sell some of its properties to a post-reorganization gaming real estate investment trust. The hedge fund reduced its exposure during the increased trading volume and liquidity that followed the announcement about the transaction. The fund also de-risked the rest of its position with about two-thirds of the position turning into cash when the deal is consummated.

The biggest negative thematic contributors during the second quarter were the fund’s offshore drilling credits, which declined as oil prices tumbled 23%.

Adjusting the portfolio