Centerbridge Said to Seek $5.75 Billion for Private-Equity Fund

Jul 16, 2014 11:00 am ET

July 16 (Bloomberg) -- Centerbridge Partners LP, the $20 billion investment firm founded by Mark Gallogly and Jeffrey Aronson, is seeking as much as $5.75 billion for distressed investments and corporate buyouts after scoring some of the biggest gains in private equity since the 2008 financial crisis.

The New York-based firm is gathering commitments for Centerbridge Capital Partners III LP, according to two people with knowledge of the matter, who asked not to be named because the information is private. The firm raised $4.4 billion in 2011 and $3.2 billion in 2006 for similar funds, according to data compiled by Bloomberg.

Susanne Clark, general counsel at the firm, declined to comment.

Centerbridge also raised credit pools to capitalize on distressed opportunities, including CIT Group Inc. bonds. In 2010, the firm teamed with Blackstone Group LP and Paulson & Co. to buy Extended Stay America Inc. for $3.9 billion. The trio almost tripled their paper profit when the hotel chain went public last year.

Its 2006 fund was generating a 21 percent net internal rate of return as of Dec. 31, according to data compiled by Bloomberg. That compares with 8.3 percent for the funds from that year for the wider industry, Cambridge Associates LLC data show.

Gallogly, 57, previously worked within Blackstone’s buyout business until he left the firm in 2005 to start Centerbridge with Aronson, a former partner at Angelo, Gordon & Co. The firm is attracting interest from investors even as other distressed- focused firms have struggled to raise money with corporate defaults at a six-year low.

Scarce Opportunities

Oaktree Capital Group LLC, the world’s biggest distressed- debt investor, cut the $3 billion goal on a fund that seeks to take control of companies by about 40 percent, said three people with knowledge of the matter in June. MHR Fund Management LLC, the investment firm co-founded by Mark Rachesky, gathered almost $1.3 billion by May for its latest distressed fund after more than a year in the market, said people familiar at the time.

Centerbridge invests across various sectors including restaurants -- it owns P.F. Chang’s China Bistro Inc -- retail, business services and financial institutions. The firm, along with Apollo Global Management LLC and Oaktree, is among the largest investors in the debt of bankrupt Energy Future Holdings Corp.

Centerbridge has also been expanding its presence in Europe, opening a London office in 2011. Last year, it took a majority stake in KKR & Co.-backed ATU Auto-Teile-Under, a German car repair and tire chain, after a debt restructuring. In September, a group led by Centerbridge and Corsair Capital LLC agreed to pay 600 million pounds ($814 million) for Royal Bank of Scotland Group Plc branches.