Lone Star Buys Big at Mortgage Fire Sale

Lone Star Fund is looking to profit from the castoffs of the credit meltdown, buying billions of marked-down assets and betting on just some of them to rebound, reports the Wall Street Journal. The Dallas-based private-equity firm run by John Grayken has closed a deal on $6.7 billion in Merrill Lynch mortgage backed assets once valued at $30.6 billion.

With Merrill financing 75%, Lone Star has some $8 billion to continue its bargain shopping after wrapping up a $10 billion fundraising push last week for its two newest funds.
Grayken honed his investment strategy for Lone Star "while resolving bad debt during the savings-and-loan crisis in the 1980s," the Journal notes, adding that the fund made its name by buying distressed companies and turning them around.
(More Lone Star stories.)