Third Avenue sizing up Anadarko credit investment

NEW YORK, June 10 (Reuters) - Third Avenue Management LLC, the firm founded by famed value investor Marty Whitman, is eyeing credit investment opportunities in Anadarko Petroleum Corp (APC.N) and onshore oil companies, a senior manager said on Thursday.

Bonds of Anadarko offer investors yields of nearly 10 percent and pose less risk than securities of BP Plc (BP.L), Jeff Gary, portfolio manager of the Third Avenue Focused Credit Fund told Reuters.

Anadarko owns a 25 percent stake in the Gulf of Mexico oil well that exploded in April, causing a massive oil spill that BP, the largest owner, has struggled to stop. Transocean Ltd (RIG.N) operated the rig.

Gary is avoiding Anadarko stocks and BP securities entirely for now, he said. Third Avenue launched its first debt fund last year in the midst of a huge rally in credit securities.

Oil and gas company bond prices plummeted on Wednesday as BP faced more U.S. government scrutiny.

Anadarko's 6.45 percent notes due in 2036 widened to 463 basis points over Treasuries on Wednesday, the widest levels in a year, to yield 8.8 percent, according to MarketAxess. They tightened by 37 basis points on Thursday to 426 basis points.

"We're looking at Anadarko as interesting," said Gary, who was speaking at a New York Society of Security Analysts panel on high-yield bonds.

"There's going to be a lot less drilling in the Gulf of Mexico," he said. "There are going to be beneficiaries onshore," he said, declining to name companies he was studying.

Credit default swaps for Anadarko and Transocean started trading on an upfront basis on Thursday, indicating increased short-term concerns over their liabilities. [ID:nN10229789]

Buyers of protection on Anadarko's debt now need to pay 8 percent of the sum insured at the outset of the contract -- or $800,000 to insure $10 million in debt for five years -- in addition to annual payments of 500 basis points, or $500,000, according to Markit Intraday.

BP's credit default swap costs rose 94 basis points on Thursday to 475 basis points, or $475,000 per year to insure $10 million in debt for five years, Markit said.

Overall high-yield bonds may offer investors attractive bets, other credit experts said.

U.S. high-yield bonds, which posted record returns in 2009, may reward investors with double-digit returns for those willing to stomach the risk of a potential credit squeeze from a European sovereign debt crisis, said Marty Fridson, global credit strategist at BNP Paribas Asset Management.

"The high yield market right now is at very attractive levels," and may post total returns of more than 10 percent this year, Fridson said at a separate panel.

High-yield bond spreads have widened to 726 basis points over Treasuries from a low of 542 basis points in late April, according to Bank of America Merrill Lynch indexes. Absolute yields are now 9.3 percent, the highest since February.

Bradley Rogoff, co-head of U.S. credit strategy at Barclays Capital, said high-yield bonds may offer investor returns of 12 percent to 13 percent this year, because of lower defaults and a relatively benign move in Treasuries.

The most attractive opportunities will come from BB-rated debt and CCC-rated names, he said.

Both groups of debt are trading at wide spread levels relative to historic averages. CCC-rated bonds may benefit most from a rally, Rogoff said at a separate panel.

U.S. high-yield bonds, hurt by a recent selloff, could recover and return more than 8 percent this year, Andy O'Brien, co-head of the syndicated leveraged finance group at JPMorgan also told Reuters this week. For more, see [ID:nN07212856] (Additional reporting by Dena Aubin; Editing by Padraic Cassidy)