(Bloomberg) -- Mudrick Capital Management’s flagship distressed opportunity fund gained a net 31.7% in 2024, according to a person with knowledge of the returns.
The roughly $2 billion fund easily bested the S&P 500’s 23% gain and the 9.9% advance last year by the PivotalPath Event Driven Index, a hedge-fund benchmark.
The master vehicle profited from bets in opportunities caused by the year-plus surge of interest rates that impaired risky firms’ balance sheets, said the person, who asked not to be named discussing the private results. That included “busted converts” — convertible bonds of companies whose shares fell far below the bonds’ exchange price.
Among the fund’s top 2024 performers were Shutterfly, fuboTV Inc., electrical aviation firm Vertical Aerospace Ltd. and the sale of NCSolutions, a joint venture between Nielsen Holdings Ltd. and Catalina Marketing Corp., the person said.
A spokesperson for Mudrick, which has about $4 billion in assets under management and was founded by distressed-debt veteran Jason Mudrick in 2009, declined to comment.
Market interest rates only eased some last year even as the Federal Reserve started easing monetary policy, keeping pressure on the balance sheets of lower-rated companies. One result has been so-called liability management exercises to reshape capital structures.
Shutterfly did one in 2023, moving intellectual property assets into a new entity so it could raise financing from existing lenders and push out debt maturities. The price of its debt has approached 90 cents on the dollar, a significant profit for lenders like Mudrick that bought around 40 cents, the person said.
As for streaming platform fubo, Mudrick Capital a year ago swapped unsecured convertible bonds for senior secured ones in a below-par debt exchange. Walt Disney Co. this week agreed to merge its Hulu + Live TV streaming service with fubo, which would create the second-biggest digital pay-TV provider.
Looking ahead, Mudrick is targeting businesses that are overly levered with loose documents and need to right-size their capital structures through LMEs or traditional restructurings, the person said.
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