``Corporations didn't lever like the tech companies did in the boom.  Most of the loans now are to sound businesses.''     Krasner spoke at a panel discussion, ``Opportunities in the Credit Space,'' at a meeting of the South Florida Hedge Fund Managers Association in Miami last week.

     ``Credit opportunities are everywhere right now because of the slow train wreck we all witnessed over the past year,'' said Michael Corcelli, a fund manager at Alexander Alternative Capital in Miami.

     Industrial companies, with their debt backed by collateral, don't have the same risks as financial companies dependent on borrowed money,
such as the banks that sold assets to raise cash after the bankruptcy of Lehman Brothers Holdings Inc. on Sept. 15, panelists said.   ``We saw the implosion of the old investment banking model, which led to the violent purging of leveraged assets,'' said Gabriel Gengler, executive vice president at Harch Capital Management in Boca Raton, Florida. ``Despite that, there are plenty of asset-rich companies producing free cash flow to de- leverage and repay their senior debt in a couple of years.''

                      Operational Strength

     Many investors are seeking debt backed by a company's collateral and operational strength, Gengler said. ``They want to know: `Can this company pay down its debts and reduce or eliminate refinance risk?'''

     Such a firm is Texas Utilities Co., which has the means to repay, said Chris Weldon, head of high-yield and distressed-debt trading at Bayside Capital in Miami.  ``It has tons of assets, and it will never fail,'' he said.  ``You are buying the senior debt below asset value, and that debt is going to get taken out.''

     Krasner at Concise Capital said he bought debt of credit card company Discover Financial Services, Inn of the Mountain Gods Resort & Casino and Brazil's Banco Cruzeiro do Sul SA.

     ``The cost of capital is extraordinarily low for banks,''
he said. ``Banks will have to start investing the money that's been
given them, so it makes sense to bet on the payoff.''

                         Tied to Economy

     Returns will be tied to economic recovery, Krasner said.  ``If you're willing to wait, you can make a killing.''
Weldon of Bayside Capital said investors ``could make north of 30 percent annualized return'' in the next few years.
     ``The risk in buying debt at 20 cents on the dollar and trying to turn around the company is that you need patience,'' he said. ``The downturn and recovery won't be v-shaped like in 2002-2003.''
     There is limited potential for short sales of corporate debt, or buying with borrowed funds in the hope prices will fall, Gengler of Harch Capital said.

     With the widening of the difference between yields on corporate debt and Treasuries, and ``the barrage of money flowing into the distressed market, the short side of high-yield credit has become a much riskier venture,'' he said.
     ``Just when you think an asset is ready to fail, a large fund comes in to either rescue or assume controlling debt positions,'' Gengler said. His firm prefers first-lien senior secured bank loans ``at the
absolute top of the capital structure.''

     Finding appropriate assets is a challenge as the economy weakens, said Salomon Konig, a fund manager at Artemis Capital Partners LLC in Aventura, Florida.
     ``We see 12 to 18 months of recession, then major inflation from the pumping-up of the money supply as a result of the financial rescues,'' Salomon said. ``The Holy Grail is diversification, but finding diversification is hard.''

For Related News:
Corporate debt TNI US COR <GO>
Hedge funds TNI US HEDGE <GO>

--Editors: Michael Weiss, Eric Morse.

To contact the reporter on this story:
Jerry Hart in Miami at 305-913-2304 or
jhart@bloomberg.net.

To contact the editor responsible for this story:
Beth Williams at +1-212-617-2307 or
bewilliams@bloomberg.net.