Carlyle’s Rubenstein Says Best Time for Energy Investing

Energy is likely to be a better investment now than at any time in the next five to 10 years, Carlyle Group LP co-founder David Rubenstein said.

“This is a great time to buy,” Rubenstein said today at Goldman Sachs Group Inc.’s financial-services conference in New York. “The bottom hasn’t been hit yet. Oil prices will probably stay low for a while.”

Oil prices have tumbled since June to the lowest in five years because of slower growth in global demand combined with surging production in North America. The Organization of Petroleum Exporting Countries spurred further selling by refusing to cut output on Nov. 27. Oil futures in New York fell as much as $3.28 to $63.56 a barrel today, 45 percent lower than the price on June 19.

Carlyle has $6 billion to $7 billion available to deploy in energy, Rubenstein said. The Washington-based firm invests in the industry in several ways, including taking equity and debt positions in companies and assets. It’s near a final close on a $2.5 billion fund for international energy, Rubenstein said in October, and it’s seeking $2.5 billion for a mezzanine vehicle to lend to energy-related companies and projects, two people with knowledge of the plans said.

Oaktree Capital Group LLC, the world’s biggest distressed-debt investor, is buying bonds of energy companies as oil prices plunge, co-Chairman Howard Marks said yesterday at the conference. High-yield bonds of energy companies have declined about 12 percent since June 19, and a sustained slump in crude may trigger a significant rise in the number of energy companies defaulting, Deutsche Bank AG credit strategists Oleg Melentyev and Daniel Sorid said in a report earlier this week.

About a third of companies rated B or CCC may be unable to meet their obligations should oil prices drop another 15 percent to about $55 a barrel, according to the analysts.

“Prices of energy-related debt have fallen, in some cases substantially,” Marks said. “If your product falls in price by 40 percent, there are a lot of levered businesses that aren’t going to service your debt. We have been investing.”

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE