Centerbridge raising $5bn distressed fund – exclusive

Centerbridge Special Credit Partners III is gathering money from LPs and will have a 25/75 percent split for a regular and “flex” account.  

Centerbridge Partners is targeting $5 billion for its latest distressed vehicle, Centerbridge Special Credit Partners III, and expects to hold a final close soon with mainly commitments from returning investors, sources familiar with the firm told PDI.

The fund is structured to put 25 percent of the commitments to work immediately, while the other 75 percent will go towards a “flex interest” portion that will be switched on when more distressed opportunities come to fruition, PDI understands. Investors have to subscribe to both the regular and flex portions, though Centerbridge is waiving fees on the flex account, according to sources familiar with the vehicle.

Centerbridge declined to comment on fundraising.

The previous Centerbridge Special Credit Partners II closed on $2 billion in 2011.

Sources told PDI that the firm has a much larger target for the current fund because market turmoil is expected to offer more distressed investment opportunities.

The previous fund gathered commitments from US public pensions including the California State Teachers Retirement System, the Massachusetts Pension Reserves Investment Management Board, the Montana Board of Investments, the State of Wisconsin Investment Board, the Alaska Permanent Fund and the New York State Common Retirement Fund, according to PDI Research & Analytics.

Centerbridge was founded in 2006 by Mark Gallogly, a former Blackstone executive, and Jeffrey Aronson, formerly of Angelo, Gordon & Co. The firm invests in private equity, distressed debt and hedge funds. It has offices in New York and London and manages about $25 billion.