NEW YORK (Reuters) - Major investors said yesterday that turmoil in credit markets and the stunning collapse of big investment banks marks the beginning of a boom in turning around distressed companies or buying their debt.

The collapse of Lehman Brothers Holdings and the merger of Bank of America and Merrill Lynch & Co this week will be followed by hundreds more bank failures that will result in buying opportunities in the transportation, publishing, home-building and even real estate sectors, investors said during a private equity conference in New York.

Mark Patterson, co-founder and chairman of MatlinPatterson Global Advisers LLC, forecast 300 to 500 more bank failures due to the credit crisis, which he compared to the Great Depression.

"We are clearly in a black swan event," Patterson said, alluding to a concept of markets being unprepared for an unexpected event that comes once in a century.

"This is a very, very challenging time, an exhilarating time," Patterson said. "Assuming you survive, we'll all look back at this as one of the great, great times to be an investor."

Wide trading levels of credit default swaps on Morgan Stanley and General Electric Capital Corp suggest there is a growing chance that the United States may be heading into another Great Depression, Patterson said.

"If you don't believe there's a 20 to 25 percent chance of a financial market-led depression, you are fooling yourself," Patterson said at a conference sponsored by Dow Jones. The current business environment is the worst, he said, since 1929.

The US stock market's crash on October 29, 1929, helped usher in the Great Depression, a decade marked by American business failures, high unemployment, drought and severe dust storms that destroyed farms and drove thousands of Americans from their homes.

The slide in US home prices and a rise in defaults on mortgage payments by American homeowners has not yet reached a bottom, according to Anders Maxwell, managing director of Peter J. Solomon Co.

Still, within the real estate sector, there are certain companies and areas where investors can begin to profit, he said.

"Fortunes are in the process of being lost, and in due course, fortunes will be made in real estate," Maxwell said.

For now, Maxwell said putting money in cash and Treasuries makes the most sense. He expects high-yield bond defaults, which are approaching 3 percent, to climb to double digits by next year.

Jim Riley, managing director of the Sierra Liquidity Fund, said he is avoiding the airline sector, which is too risky, to study opportunities in the mortgage bond market. Still, he said those who invested in distressed assets over the past three to six months "invested too early."

Harvey Tepner at WL Ross & Co LLC, told Reuters after a panel discussion that "there will be more bank failures, hundreds to a thousand."

Tepner declined to comment on his investment strategy or on where he sees value.

Asked whether a major U.S. automaker could fail, Rodger Krouse, co-CEO of Sun Capital Partners, said: "Every company is fair game."

After the US stock market's closing bell yesterday, Ford Motor Co. said Lehman's commercial paper operation is a lender participating in an $11.5 billion revolving credit facility.

Ford also said Lehman's commitment under that credit line is $890 million, all presently unfunded.