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Tennenbaum Capital Said to Raise Money for Distressed-Debt Fund

Date: Tuesday, March 23, 2010
Author: Bloomberg

Tennenbaum Capital Partners LLC, an investment firm founded by Michael Tennenbaum, is seeking about $1 billion to buy distressed debt after starting a bankruptcy- loan fund, said two people with knowledge of the plans.

The company expects to complete the first round of fundraising in two to three months, said the people, who declined to be identified because the plans are private.

Ian Campbell, a spokesman for Tennenbaum, declined to comment.

Tennenbaum and Avenue Capital Group are opening funds after a record credit-market rally. The Standard & Poor’s/LSTA U.S. Leveraged Loan 100 Index returned 52 percent last year, the most since its 2002 inception. Tennenbaum finished raising $454 million in December for a fund focusing on debtor-in-possession financing. Avenue Capital, the New York firm started by Marc Lasry, is seeking $3 billion for a distressed-debt fund, a person with knowledge of the plans said last month.

“A lot of money has been committed to distressed trading strategies,” said Craig Marmer, partner at Probitas Partners Inc. Some investors are now looking at distressed debt as a way to gain control of companies, he said.

Tennenbaum DIP Opportunity Fund LLC, the debtor-in- possession fund, targets loans of about $10 million in size.

Distressed-debt hedge funds returned 29 percent last year, according to data from Hedge Fund Research Inc.

The $1.34 billion Tennenbaum Opportunities V LLC fund had the fifth-best performance among hedge funds during the first nine months of last year, Bloomberg Markets magazine reported in February.

“In addition to a long tenure investing in distressed debt, the Tennenbaum team has taken companies over when needed so they have hands-on experience running companies,” said Don Pierce, investment officer at San Bernardino County Employees’ Retirement Association, an investor in one of Tennenbaum’s previous funds.

Babson Capital Management LLC, the investment firm that oversees $118 billion, is also among Tennenbaum’s investors. Tennenbaum co-manages several of its investment funds with Babson.