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 Times – Roomy Khan, the central witness who brought down the Galleon hedge fund, is a former Galleon employee with a history of financial trouble who agreed to cooperate with prosecutors after she was caught making trades using inside information.
Ms. Khan, previously identified only as “Tipper A” or a cooperating witness, provided much of the evidence that prosecutors are using to bring insider trading charges against the billionaire Raj Rajaratnam, who is shutting down his Galleon fund in the wake of the charges.
Globe and Mail – A U.S. hedge fund with a reputation as an activist investor has become the biggest shareholder in AbitibiBowater Inc., putting added pressure on management at the struggling paper giant to find a speedy solution to its financial woes.
Seattle-based Steelhead Partners LLC revealed in a regulatory filing made Friday that it now holds 14.8 per cent of Abitibi’s shares. The fund has tripled its stake in the debt-heavy newsprint king in recent weeks, jumping to the head of the pack among Montreal-based Abitibi’s shareholders.
Steelhead first said in July that it had acquired 5 per cent of Abitibi’s shares, surpassing the threshold that required it to disclose its holdings under securities laws. Its stake had grown to 10 per cent in early January and almost 15 per cent by the end of the month, according to its most recent filing made with the U.S. Securities and Exchange Commission.
New York (HedgeCo.Net) – Hedge Fund Davidson Kempner Capital Management has declared a proxy victory after replacing all but one of the board members of the Sun-Times Media Group.
Davidson Kempner, who owns a 6% share in the parent company of the Chicago Sun-Times, expressed its discontent with the current board, blaming them for the financial woes of the company.
Hedge funds are no strangers to shaking up boards of companies in which they invest, many times in order to gain a strategic position where they can be involved in management and the decision making process in hopes of garnering higher returns for shareholders.
"Through the provision of these consents, the stockholders have made clear their desire and support for a board of directors that is made up of professionals experienced in publishing and restructuring," said Davidson Kempner. "Given the operating and financial challenges before Sun-Times, we believe that the reconstituted board has the better potential to guide and lead Sun-Times."
The new slate includes Jeremy Halbreich, former General Manager for the Dallas Morning News and executives Michael Katzenstein and Robert Schmitz. Robert Poole, who holds an 11% stake in the company, will remain on the board. The hedge fund has also vocalized their desire to dump current CEO Cyrus Freidheim.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
New York (HedgeCo.Net) – GMAC LLC, the financing arm of struggling U.S. automaker GM, will receive $6 billion from the federal government.
The deal entails the treasury purchasing $5 billion in senior preferred equity in the company, while providing GM with a $1 billion loan. This is in addition to the earlier $17.4 billion required to keep both GM and Chrysler afloat.
The government said the deal comes as “part of a broader program to assist the domestic automotive industry in becoming financially viable.” GMAC will pay an 8 percent dividend as part of the deal, while the Treasury will receive preferred equity via warrants from GMAC, equaling 5 percent of the preferred-stock purchase. These will pay a 9 percent dividend.
Originally, the Fed’s loan required GMAC to raise new capital through a debt-equity swap that was unsuccessful multiple times. The company had said it would raise $30 billion by converting some of its debt to preferred-stock holdings. As of last week, after multiple extensions, GMAC was still short. However, they have announced amidst the government’s aid, that they have been able to raise the capital.
GMAC recently changed its status to a bank-holding company, so they could be eligible for federal help and other advantages. The company says they plan on making credit more readily available again to consumers, after a large drop in auto financing due to their own financial woes. The new status also entitles GMAC to receive short-term emergency loans from the government if needed.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
