Each business day HedgeCo.Net keeps you informed with the top hedge fund industry news, opinion and insight from around the globe. From the latest hedge fund launches, to the impact of regulation, competition, and investor activism - we track the topics and people that make a difference to you.
New York (HedgeCo.Net) – Hedge Fund Appaloosa Management may have tried to turn their back on Delphi, but somehow they just can’t seem to get away. Ensnarled in a nasty court battle with the Michigan auto parts supplier, the judge is now reconsidering original fraud claims brought against the New Jersey based hedge fund.
Delphi had sued the investor group headed by Appaloosa that originally agreed to inject $2.55 billion into the bankrupt company that was supposed to help lift them out of Chapter 11. The investors commitment was going to provide a much needed piece of the $6.1 billion in financing that Delphi needed to secure by the April deadline. When Appaloosa walked away as the deadline neared, Delphi was left scrambling, clinging only to former parent company General Motors.
Judge Robert Drain told a Manhattan Court this week “It seems to me that I was unclear in what aspects of the allegations needed to be dealt with…I may have well been wrong.”
Drain said that when he dismissed this claim for fraud originally, he did not feel that Appaloosa made “affirmative misrepresentations” to Delphi about plans to scrap the financing deal. Now, Drain is reconsidering, saying that any failures to communicate a change of mind could very well constitute fraud.
Both parties were asked to gather more information and submit briefs on the fraud claim by the next hearing on October 21. Delphi is seeking damages from Appaloosa and a ruling that could make them deliver their original financial obligation.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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New York (HedgeCo.Net) – Despite valiant efforts to find investors and stay afloat the credit crisis, Lehman Brothers Holdings Inc. is now at the center of the biggest bankruptcy filing in history.
The fourth-largest investment bank filed for Chapter 11 protection in a Manhattan court today, after write downs stemming from the subprime mortgage fall-out that it helped create proved to be too much to take.
Lehman, who was the largest underwriter of mortgage-backed securities, listed over $613 billion in debt, including over $157 billion owed to unsecured creditors and over $155 billion owed to bondholders.
"The uncertainty, particularly among the banks through which the company clears securities trades, ultimately made it impossible for the company to continue to operate its business,” said Chief Financial Officer Ian Lowitt in the filing.
Shares of Lehman were trading as low as 29 cents this morning; a fitting finale after losing 94 percent of its market value this year. Treasury Secretary Henry Paulson and the Federal Reserve had been trying to come up with a deal that would keep Lehman afloat. Paulson made it clear that he did not want to use taxpayer money to bail out Lehman.
While London-based Barclays looked to be interested in investing in Lehman, they pulled out yesterday amidst concerns over the lack of guarantees from the U.S. government to protect against losses on assets. Bank of America then followed suit, withdrawing from talks with Lehman only to acquire Merrill Lynch shortly thereafter.
Lehman was planning on selling a majority stake in their asset-management unit for around $4 billion. While talks are still in the works, no conclusion has been reached. Speculations that more losses were to come coupled with its liquidity crunch have prevented any sale from taking place as of yet and ultimately led to the demise of the bank.
Lehman now joins Bear Stearns and Merrill Lynch in the group of banks that were "too big to fail,” that couldn’t weather the credit crunch.
Lehman’s assets are listed at $639 billion. They have about 25,000 employees worldwide.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds! Be sure to check out our sister sites. For more information, visit www.hedgeconetworks.com
New York (HedgeCo.Net) – Service providers for hedge funds scored a victory yesterday when a New York judge threw out a suit filed against UBS by defrauded investors.
Judge Charles Ramos dismissed the complaint in a Manhattan court at the request of UBS, who served as prime broker and custodian to the now collapsed hedge fund Wood River Partners, LP.
The investors had accused UBS of improperly profiting from the trades of the fund, and claimed that UBS had made $100 million by selling borrowed shares of Endwave Corp., the fund’s main holding.
The plaintiffs also accused UBS of creating a short market for Endwave stock while borrowing from the hedge fund’s account to buy shares. This in turn decreased the fund’s portfolio by almost $20 million, according to their allegations.
"The facts alleged do not support the causes of action,” Ramos stated. "These plaintiffs lack standing."
Investors were duped into thinking their assets were being diversified when in reality they weren’t. The hedge fund exceeded the 10% cap on ownership of any one company, though it wasn’t clear whether or not UBS had knowledge of that situation.
Nevertheless, it was a victory for service providers seeing as how recent trends show more and more of disdained investors going after affiliated or hired help by defunct hedge funds.
Investors in Wood River lost approximately $100 million. The plaintiffs of the lawsuit were made up of a group that had funneled in $79 million. John Whittier, who headed the hedge fund, is now serving three years behind bars.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds! Be sure to check out our sister sites. For more information, visit www.hedgeconetworks.com
New York (HedgeCo.Net) – The proxy battle waged by two hedge funds against railroad operator CSX is far from over, despite a ruling against the funds last week.
TCI, who runs the Children’s Investment Fund of Britain, and 3G Capital Partners, continue in their quest to elect 5 nominees to the board of CSX, citing lack of railroad experience among the current 12 members. The hedge funds have a combined 8.7% share in CSX.
A Manhattan court recently ruled that the two hedge funds had violated disclosure regulations, though there was nothing the judge could do to stop the funds from voting their shares at the company’s annual meeting on June 25, much to the dismay of CSX.
The ruling also stated that, “any penalties for defendants’ violations must come by way of the Securities and Exchange Commission or the Department of Justice.” CSX may appeal the decision.
The hedge funds wish to gain seats on the board in order to gain a strategic vantage point from inside the company. Funds may do this in an attempt to gain higher returns for shareholders.
“Michael Ward, the Chairman and CEO of CSX, wondered why we haven’t just taken our profits and sold our shares, much as the board and management of CSX have done over the past two years. If we believed that CSX already had achieved its full operating potential, that’s exactly what we would do. However, in our view, CSX has only just begun to improve…” said the hedge funds in a recent letter to shareholders, prompting them to send in their proxy cards.
Alexandre Behring from 3G and Chris Hohn from TCI are two of nominees looking to gain seats. The other three hopefuls are not affiliated with the funds, but have experience in the railroad industry, something that the fund’s believe is crucial to the value of the company.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds! Be sure to check out our sister sites. For more information, visit www.hedgeconetworks.com
