Exclusive: Avenue wraps up US energy fund at $1.3bn

Avenue Capital Group reached a final close on its Avenue Energy Opportunities Fund at the end of June, receiving equity commitments totalling approximately $1.3 billion, according to sources familiar with the fundraise. The vehicle was formed to take advantage of the increasing amount of distressed and stressed companies in the energy and utilities sector in North America. It was originally shown in LP documents to have a $750 million estimated target.

Avenue declined to comment.

The Teacher Retirement System of Texas is the last known investor to dedicate a large chunk of money to the fund. The pension plan invested $150 million in the vehicle on 30 June, according to a fund commitments list provided to PDI.

The board of the Pennsylvania Public School Employees’ Retirement (PSERS) also voted to invest $200 million in the fund in December. At the time, Avenue anticipated gathering $750 million for the strategy, but ended up raising more money as the energy opportunity became even more lucrative after oil prices collapsed. According to PSERS’ documents, the investments will be made primarily in debt, with select equity securities of other obligations of stressed and distressed North American energy and utility companies. More than half of the investments will be made in senior secured debt or other debt that is structurally senior to other portions of the capital structure.

PSERS described the market opportunity saying that “technological and regulatory dislocations are occurring in the North American energy sector.” The significant leverage that energy and utility companies have employed to address the dislocations has created stressed capital structures needing recapitalization. In December, Avenue estimated there to be $109 billion worth of distressed opportunities across 55 companies in independent power producers, coal, exploration and production and energy service/pipelines/refining sectors.

Chief executive and Avenue co-founder Marc Lasry, as well as portfolio manager Matthew Kimble, are overseeing the fund. Four additional investment professionals will be focused on the strategy. One of these people is Craig Hart, whom Avenue hired as a managing director in its energy group in March last year. He was previously an executive view president and chief financial officer at the US Power Generating Company and held other senior roles there since 2004. He brought an associate with him to round out the energy team at the time.

Avenue Capital was founded by Lasry and managing partner Sonia Gardner in 1995. It has about $12.9 billion in assets under management across alternative investment strategies focused on the US, Europe and Asia. They include credit funds, private equity, hedge funds, real estate and CLOs, among others. The firm has offices in New York, London, Beijing, Hong Kong, Luxembourg, Madrid, Milan, Munich, New Delhi and Singapore.