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Avenue sets $1 bln target for second energy distressed-debt fund

  • New fund offers discounts to existing LPs
  • Fund I netting 17 pct IRR, 1.2x multiple
  • Minnesota backs new fund for $100 mln

Avenue Capital Group is marketing a second energy-focused distressed-debt fund just two years after raising its debut vehicle for the strategy.

Avenue Energy Opportunities Fund II is targeting $1 billion for investments in North American energy and utility businesses, Minnesota State Board of Investment documents show.

Avenue’s first energy-opportunities fund, which pursued a similar strategy, was netting a 17 percent internal rate of return and 1.2x multiple on invested capital, according to a source with knowledge of the first fund. Minnesota committed $100 million to that 2015 vintage fund, which raised $1.3 billion.

Minnesota’s board earlier this week approved a $100 million commitment to Fund II, pending final negotiations between the firm and investment-board staff.

Limited partners that backed the firm’s first energy opportunities fund will receive steep fee discounts and a bigger split of Fund II’s profits, according to Minnesota documents. Existing LPs will pay a 1 percent management fee, with Avenue collecting 10 percent of whatever profits the fund generates as carried interest.

New LPs will pay a 1.5 percent management fee on invested capital during the fund’s investment period, and 1.25 percent thereafter. Avenue will take 20 percent carried interest on those commitments.

Avenue expects to invest the fund in exploration and production, power and services, and midstream energy companies.

The leveraged credit market for energy-related assets has grown to roughly $174 billion, according to one Minnesota memo, which notes that many companies have had difficulty obtaining liquidity as power and energy prices fell.

Avenue Capital was founded in 1995 by Marc Lasry and Sonia Gardner. The firm has $10.3 billion of assets under management

Action Item: More about Avenue Capital: www.avenuecapital.com

Milwaukee Bucks owner and Avenue Capital Founder Marc Lasry on Feb. 17, 2017, shoots the ball against American actor Anthony Mackie during the All-Star Celebrity Game at Mercedes-Benz Superdome in New Orleans. Photo courtesy Derick E. Hingle-USA Today Sports