New York-based Avenue Capital Group is fundraising for its first fund dedicated to troubled energy companies.
Led by portfolio manager Matthew Kimble, Avenue Energy Opportunity Fund will invest in corporate, distressed-debt securities and other special situations in North America, according to a source familiar with the situation.
It will focus on senior-secured debt or securities where priority is given in the event of a default situation.
Avenue Capital is reportedly set to benefit from investing in the distressed debt of Dallas-based utilities giant Energy Future Holdings (EFH), which was taken private in 2007 by KKR, TPG and the private equity arm of Goldman Sachs in a record breaking $48 billion deal.
Formerly known as TXU Corp, EFH’s fortunes crumbled when the shale gas boom pushed down the price of natural gas, forcing the company to file for bankruptcy in April this year.
EFH’s state-regulated sister company and power plant Oncor, which did not file for bankruptcy, was due to be taken over by a creditor group led by Avenue Capital, according to the New York Post.
The value of Avenue Capital’s unsecured debt soared following the bankruptcy filing, as it was the most profitable asset, according to Bloomberg.
Separately, Avenue Capital, founded by siblings Marc Lasry and Sonia Gardner in 1995, is also understood to be seeking to launch a distressed debt-focused investment trust in the UK in September.
Hedge fund veteran Lasry is expected to seed it with several hundred million dollars of his own money, according to Investment Week.
Avenue Capital has investments in the US, Europe and Asia totalling $14 billion of assets under management as at 31 May 2014.
A spokesperson for Avenue Capital declined to comment on the Avenue Energy Opportunity Fund and had not responded to a request for comment on the UK investment trust at time of going to press.