• Billions in junk debt, defaults coming to `theater near us'
  • GSO struggling to find producers that can survive carnage

Blackstone Group LP’s credit unit, which has 20 dealmakers dedicated to energy, hasn’t found much to do during the commodities price rout -- just yet.

“We haven’t yet found a lot of opportunity,” Bennett Goodman, the head of Blackstone’s GSO Capital Partners, said Thursday at a conference in New York.

“No doubt there’s going to be tons and tons of opportunity,” Goodman said. “There’s another $200 billion coming in a theater near us sometime soon,” he said, referring to the energy producers whose credit is being monitored for possible downgrade by rating companies.

Oil and natural gas exploration and production companies were responsible for 17 of last month’s record-breaking 25 liquidity downgrades, Moody’s Investors Service said this week. Its liquidity stress index for the oil and gas sector, which signals potential defaults of high-yield bonds, surged to a record 27.2 percent and pushed the composite index to its highest level in more than six years.

Investment Timing

Oil’s 68 percent decline since its June 2014 peak has left dealmakers divided over when exactly to step in with debt or equity investments. Blackstone’s GSO has stayed on the sidelines because of uncertainty about whether producers can repay loans while continuing to fund their businesses long enough for oil prices to recover, said Goodman, who co-founded GSO and joined New York-based Blackstone when it acquired the firm in 2008.

“We want to have a company where our loan is more than covered in today’s price environment and we want the companies to have enough liquidity to get through three, four, five years, so that they have enough time to catch the recovery,” Goodman said, speaking at the Citi Asset Management and Broker Dealer Conference. “It’s that combination of things where we’re struggling to find a lot of companies that fit that profile.”

Jeffrey Aronson, Centerbridge Capital Partners’ co-founder, said Thursday at another conference that he likes what he sees in energy debt after the “blood on the street” experienced by producers. Like Goodman, he said he’s looking for companies that can outlast the carnage of the oil rout.

“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,” Aronson said at the University of Texas Investment Management Company’s 20th anniversary conference in Austin.

GSO managed $79 billion in credit assets as of Dec. 31. Goodman is a partner and member of the board of Blackstone, which oversees $336 billion in private equity holdings, real estate, credit and hedge funds.

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