Centaurus finds opportunities in credit markets

By Simon Challis

LONDON (Reuters) - The subprime-related meltdown in the corporate debt market is creating the best investment opportunities in the credit markets in years, the head of hedge fund firm Centaurus Capital said on Tuesday.

"We expect we are going to be very busy on the credit side," said Bernard Oppetit, Centaurus' Chairman and CEO, speaking at the Reuters Hedge Fund & Private Equity Summit in London. "We are starting to see opportunities that we have not seen in a very long time."

The firm is reversing its equity-focused investment strategy, to focus on the credit markets for the first time in five years.

"Credit markets have done a lot worse than equity markets. There is a disconnect there that is striking," said Oppetit. "Given the environment, we're moving more towards credit again."

Oppetit said: "We are now at a stage where we can find some very attractive pieces of paper to buy, both loans and bonds. This is what we've been doing in the last couple of weeks."

Corporate debt issued by highly rated financially strong companies was now trading at attractive discounts, he said.

"One striking feature of this crisis we've been through is that the corporate bond market has gone down ... to levels which have not been seen for many years."

CREDIT OPPORTUNITIES ABOUND

Oppetit singled out high-grade corporate debt as offering particularly attractive investment opportunities.

"In the credit markets there's been a parallel shift: everything has gone down in sync -- the good with the bad," said Oppetit.

"What should happen next is that the good should go back up and the bad should keep going down."

Some corporate bonds are trading at around 60 or 70 percent of their face value, he said.

While corporate loans were trading at higher prices, typically at between 80 and 90 percent of their face value, Oppetit expected prices to fall as banks seek to offload more of these in a hurry. Oppetit said. "They have sold only a small part of their inventory."

The hedge fund is looking to make money from capital structure arbitrage -- buying one type of security and shorting another in the same company, he said.

It relies on cash bonds and credit default swaps (CDS) and focuses on the most liquid names, so liquidity is not an issue, he said.  Continued...