Brigade Capital Management LP, a hedge-fund manager that focuses on junk bonds and distressed debt, is raising new money tied to an anticipated downturn in high-yield and leveraged-loan prices, WSJ Pro Bankruptcy reported. The firm, which manages $20 billion, recently started talking to investors about raising funds of up to $1 billion, which will be designed to be deployed only if there is a downturn in the high-yield and leveraged-loan markets. The funds, which will have a so-called delayed drawdown feature, won’t actually collect any money from investors today but rather tap the committed capital when interest rates on high-yield bonds and leveraged loans climb above levels that Brigade agrees upon with investors. Brigade won’t touch the money until rates on high-yield bonds and leveraged loans climb to 6 percent above the prevailing rate on Treasury bonds. At that point, Brigade can draw on one-third of investors’ funds. Brigade has two years for its bet on a downturn in the high-yield markets to play out. If yields on high-yield debt remain less than 6 percent above the prevailing Treasury rates, then the money won’t be available for Brigade to invest.
