John Paulson is diving back into troubled debt. Paulson & Co., which made $15 billion betting against subprime mortgage bonds, is seeking to raise $1.5 billion for a private-equity fund that will invest in companies going through bankruptcy, restructurings and in need of rescue financing, according to documents obtained by Bloomberg. The hedge fund manager is wagering that dislocations in credit markets, particularly in sectors such as energy, metals and mining, will provide opportunities.

Paulson, which oversaw $16.1 billion as of Jan. 1, is starting the private-equity pool after a rough patch for its hedge funds. Although the money manager already makes some distressed investments, the new vehicle -- which will tie up investor capital for up to six years -- will focus on less liquid firms and co-investments. The company sees investors doubling their money during that period before fees, the documents said.

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