`Blood on the Street' in Energy Debt Intriguing to Centerbridge

Looking at the wreckage of the worst energy junk-bond rout on record, Jeffrey Aronson of Centerbridge Capital Partners LP likes what he sees.

“There has been so much blood on the street in this space, and the technicals were so poor, that it intrigues us," Aronson, managing principal and co-founder of Centerbridge, which manages $11 billion in distressed debt, said at the University of Texas Investment Management Company’s 20th anniversary conference Thursday in Austin. "We buy things that no one else wants, that’s what we do. We typically try to buy them at a point at a point of maximum fear.”

High-Yield Yield A yield is defined as the earnings generated by an investment or security over a particular time period. This is in typically displayed in percentage terms and is in the form of interest or dividends received from it.Yields do not include the price variations, which differentiates it from the total return. As such, a yield applies to various stated rates of return on stocks, fixed income instruments such as bonds, and other types of investment products.Yields can be calculated as a ratio or as a A yield is defined as the earnings generated by an investment or security over a particular time period. This is in typically displayed in percentage terms and is in the form of interest or dividends received from it.Yields do not include the price variations, which differentiates it from the total return. As such, a yield applies to various stated rates of return on stocks, fixed income instruments such as bonds, and other types of investment products.Yields can be calculated as a ratio or as a Read this Term energy debt is down 8 percent this year after plummeting 24 percent last year, compared with a 5 percent drop in the broader high-yield market, according to Bank of America Merrill Lynch Indexes. The rout has come as commodity prices have fallen near the lowest levels in at least 25 years, according to the Bloomberg Commodity Index, amid reduced demand for oil, metals and minerals as China’s economy cools.

‘Defaults, Bankruptcies’

Aronson, who spoke at a session with Fortress Investment Group LLC founder Peter Briger, said he’s looking for companies that can outlast the carnage of the oil rout that is now in its 21st month.

“As long as they can survive an extended period of depressed prices and not burn a lot of cash, or better yet not make any money but not lose any money, we like the optionalities of sticking with that," he said, adding that Centerbridge’s energy-debt holdings are "modest," up to 5 percent from zero a year ago.

For Briger, Fortress’s co-chairman and principal, the best opportunities in energy junk may come through private equity.

"If energy prices stay down here, we’re going to see a tremendous amount of defaults and bankruptcies," he said. "It will be the supply/demand imbalance, and the resetting of price of those capital structures in those assets, that create the opportunity for someone like us.”

--With assistance from Katherine Burton To contact the reporters on this story: Katia Porzecanski in New York at kporzecansk1@bloomberg.net, Cordell Eddings in New York at ceddings@bloomberg.net. To contact the editors responsible for this story: Nabila Ahmed at nahmed54@bloomberg.net, Kenneth Pringle, Faris Khan

By: Katia Porzecanski and Cordell Eddings

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