Centerbridge Credit Fund Soars 90% on Pandemic Disruption Bets

A $3 billion credit fund Centerbridge Partners began investing in March returned an annualized 90% in 2020, making it a top performer among vehicles designed to take advantage of pandemic-related price dislocations.

As the pandemic took hold in the U.S., Centerbridge deployed $1.8 billion in funds following its special credit strategy, according to people with knowledge of the matter. It continued to invest additional money in beaten-down debt through year-end, the people added.

The firm’s Special Credit III Flex Fund, which targeted consumer-facing industries battered by market turmoil, including rental cars, airlines, auto parts and entertainment, returned 121% on a gross basis, said the people, who asked not to be identified discussing private results.

A representative for Centerbridge declined to comment.

Centerbridge’s $1.3 billion flagship vehicle, the Special Credit III fund, gained a net 8.7% last year, the people said.

Centerbridge Credit Fund Soars 90% on Pandemic Disruption Bets

The $28 billion private investment firm specializes in lending to and buying troubled companies, many of which are going through Chapter 11 restructurings. It recently became the owner of SpeedCast International Ltd. following the satellite communications company’s bankruptcy last year.

New-York based Centerbridge also teamed up with Oaktree Capital Group on a restructuring plan for bankrupt auto-parts maker Garrett Motion Inc. That proposal still needs court approval, and has been challenged by other shareholders.

The firm also lent to battered movie theater chains AMC Entertainment Holdings Inc. and Cineworld Group Plc, Bloomberg previously reported. Centerbridge and Oaktree recently led a new loan backed by AMC’s European assets designed to help the company avoid bankruptcy.

Centerbridge was founded in 2005 by Jeffrey Aronson and Mark Gallogly. Aronson, who currently oversees the firm’s investment activities, started his career as a lawyer at Stroock & Stroock & Lavan. He later led Angelo Gordon & Co.’s distressed securities and leveraged loan investments. Gallogly retired from Centerbridge in December and earlier worked at Blackstone Group Inc.

Distressed debt strategies averaged gains of around 13% last year, according to Hedge Fund Research Inc. The benchmark for the riskiest corporate bonds returned 2.3% in 2020, while the S&P 500 rose 16%.

Private equity peer KKR & Co. reported a 52% gain in its dislocation fund, Bloomberg reported last week. The firm pounced on early distress stemming from the pandemic with investments including a beaten-down Sprint Corp. loan and rescue financing to live-events manager Legends Hospitality.

©2021 Bloomberg L.P.

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