Magnetar Seeking Cash to Fund Money-Starved Energy CompaniesSimone Foxman
Magnetar Capital is seeking to deepen its investments in North American energy as the fallout from last year’s oil price plunge turns into the hot new hedge fund trade.
The $12 billion firm is raising a fund to invest in the stocks and bonds of energy companies, according to marketing documents obtained by Bloomberg News. The Evanston, Illinois-based firm, which specializes in bets around corporate changes and bond markets, sees opportunity to provide North American oil and gas companies with short-term funding and cash to grow as bank financing dwindles.
Private equity and hedge funds are racing to raise money to try and capitalize on the 50 percent drop in oil prices that’s pushed high-yield bond prices lower and made it more difficult for riskier energy companies to borrow. Distressed debt specialists including Avenue Capital Management, Mudrick Capital Management and Apollo Global Management LLC have planned funds to invest in the industry.
The influx of cash -- and a steadying in oil prices -- has elevated high-yield energy company bonds since the end of January, eliminating some of the easy trades. Greg Beard, the head of energy investing at New York-based Apollo, said last month his firm is waiting for energy producers to come under increased pressure before buying companies and others are offering to provide loans to cash-strapped firms.
Magnetar, led by Chief Executive Officer Alec Litowitz, is already heavily involved in oil and gas companies.
Eric Scheyer, the head of Magnetar’s energy business, oversees a group that manages $3.8 billion, according to the fund document. Michael Wilds, the chief operating officer of the energy business, who previously spent 20 years at Koch Industries, and Adam Daley, a senior money manager, will also oversee the fund.
Magnetar also started a similar fund in 2013 that had $260 million under management at the beginning of this year.
Tony Fratto, a spokesman for Magnetar with Hamilton Place Strategies, declined to comment on the firm’s plans.
About 70 percent of Magnetar’s publicly disclosed U.S. equities were tied to the energy sector at the end of 2014, according to a regulatory filing. The disclosure -- which shows $3.6 billion of U.S. equities held by Magnetar -- doesn’t reveal investments outside stocks or bets against companies.
The firm, along with Blackstone Group LP’s GSO Capital Partners, last month helped Austin, Texas-based driller Jones Energy Inc. to repay its credit line. They provided the company $250 million through a private debt offering and buying $50 million of equity.