LONDON U.S. private equity firm Blackstone (BX.N) and debt specialist Avenue Capital are talking to investors to raise $5 billion to invest in the debt markets, according to a report in the UK's Sunday Telegraph newspaper.
The report said Blackstone, through its GSO Capital Partners unit, hoped to raise $3 billion to invest in private equity and other private transactions, replacing bank debt or as mezzanine funding, which is part-equity, party-debt.
Avenue Capital is looking to raise as much as $2bn to invest in the debt of U.S. companies, the report added.
Private equity funds are shrinking as investors become choosier and funds that have fallen behind in performance could drop off the radar when they return to the market, executives and investors said at a major conference last week.
Data from London-based private equity research firm Preqin in April showed that $46.1 billion was raised in the first three months of the year by private equity firms -- a quarter of the amount raised at the peak of the latest private equity boom in 2007.
Blackstone and Avenue Capital were unavailable for comment when contacted by Reuters.
(Reporting by Rhys Jones; Editing by Hans Peters)