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The Associated Press – CIT Group Inc. shares plunged in premarket trading Wednesday as the commercial lender is reportedly trying to craft an exchange that would cut its debt and offer bondholders an equity stake in the company in a bid to avoid bankruptcy.
Shares of the New York-based financial firm, one of the nation’s largest lenders to small and midsize businesses, fell 61 cents, or 27.7 percent, to $1.59 in premarket trading.
CIT Group is preparing an exchange offer that would eliminate as much as 40 percent of its more than $30 billion in outstanding debt, The Wall Street Journal said, citing anonymous sources. The exchange would hand control of the company over to its bondholders and wipe out common stockholders, according to the report.
The Guardian – Bayswater Asset Management, a computer-driven hedge fund shut down last year after big losses during the credit crisis, has relaunched after revamping its risk management controls, its new backers said on Wednesday. San Francisco-based Bayswater had initially been backed at its launch in 2004 with $25 million from Man Global Strategies, part of hedge fund giant Man Group.
However, its strategy of trying to exploit inefficiencies in global markets lost 12 percent in the six months to September 2007 and it returned money to investors after being caught out by a vicious circle of deleveraging in July and August that hit many computer-driven funds. The firm has now relaunched with large-scale changes to its risk management system and added a manual override, according to Revere Capital Advisors, which has seeded the fund with an initial $10 million and also plans to buy an equity stake in the firm, a spokesman said.
Bloomberg – Hedge fund manager George Schultze says he may avoid lending to any more unionized companies after being burned by President Barack Obama in Chrysler LLC’s bankruptcy.
Obama put Chrysler under court protection on April 30 after lenders balked at a proposal giving them about 29 cents on the dollar for their $6.9 billion in debt. The investors said the president’s plan favored a union retiree medical fund whose claims ranked behind them for repayment. It was offered a 55 percent equity stake in the automaker.
New York (HedgeCo.Net) – The Obama administration is considering a deal in which they would forgive part of the $13.4 billion owed to them from General Motors Corp. in exchange for an equity stake in the company, according to a report by Bloomberg News who citing people familiar with the matter.
The deal comes as GM approaches their June 1 deadline to show they can become viable, the sources said.
GM is already considering breaking up the company into a sector comprised of only the profitable parts, such as Chevrolet and Cadillac, while the non-profitable entities, such as Hummer, can be liquidated.
GM still has major debt obligations to its bondholders, who are owed about $27.5 billion. The company also owes its health care fund about $20 billion. Retirees who are entitled to health care benefits would most likely get more equity in the new entity than the bondholders.
Bondholders previously opposed a plan by GM that would give them 90 percent equity in the newly restructured company, though that would have required them to swap most of their stake at the time.
President Obama has been vocal in his belief that bankruptcy is the best option for GM, though new CEO Fritz Henderson is doing everything he can to avoid that scenario. GM continues to work with the U.S. Treasury and the Obama administration in hopes of achieving a new, reorganized business model.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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West Palm Beach (HedgeCo.net) – Overstock.com Inc. announced it has settled all claims against Gradient Analytics and its principals and officers named as defendants in Overstock’s defamation case filed in Marin County, California.
Overstock.com chairman and CEO, Patrick Byrne said, "I am pleased to publish this statement from Gradient Analytics:"
Having reviewed all SEC filings, relevant accounting literature, and all other information available to it, Gradient now believes that, to the best of it knowledge, Overstock’s stated accounting policies did in fact conform with Generally Accepted Accounting Principles (GAAP) and regrets any prior statements to the contrary.
Some of Gradient’s prior reports asserted that certain Overstock directors, i.e., Allison Abraham, John Fisher and Gordon Macklin, were not independent directors according to Gradient’s criteria for evaluating independence.
However, under NASD Rules, those directors were independent. Gradient extends its apology to the Macklin family for any remarks or observations concerning the suitability or independence of Mr. Gordon Macklin.
Gradient has examined and improved its internal policies concerning how it communicates with clients, including hedge funds, and the media.
Gradient regrets that the parties have been embroiled in litigation over its reports and looks forward to both sides’ moving forward with their respective businesses.
Byrne added, "I wish Gradient Analytics the best in their future endeavors. Overstock.com will now focus on the remaining defendants, Copper River, David Rocker, and Mark Cohodes."
The details of the settlement reached are confidential.
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