Redwood Plans $1 Billion Fund for Long, Illiquid Credit Bets

Redwood Capital Management is seeking to raise about $1 billion for a fund built to hold illiquid credit investments with long time horizons, as complex debt maneuvers stretch out the path to restructurings.

The new fund at Redwood, which manages more than $10 billion, will be structured to invest continuously rather than deploy cash only during market dislocations, according to people familiar with its creation and information shared with investors and seen by Bloomberg.

Troubled borrowers lately are taking longer to reach bankruptcy or broader balance-sheet overhauls, often using debt exchanges and other liability-management deals to initially fend off a ...