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Bloomberg – Dalton Investments LLC, the Los Angeles-based hedge fund with 70 percent of its assets in Japan, is starting a 50 billion yen ($550 million) fund that will invest in U.S. distressed assets, taking advantage of low prices.
The fund has raised about 10 billion yen from U.S. investors and will begin marketing in Japan by the end of March, said Junichiro Sano, chief executive officer of Dalton’s local unit. It will invest in bonds sold by U.S. companies that once had AAA ratings and have since been downgraded below investment grade, aiming to profit from the high yields on the debt.
Dalton, co-founded by James Rosenwald and Steven D. Persky in 1998, aims to raise its assets under management after they fell 23 percent to about 100 billion yen this year amid the biggest financial market losses since the Great Depression. Global financial institutions have posted about $989 billion in writedowns and credit losses linked to the U.S. mortgage market collapse, pushing corporate bond yields higher.
Reuters – A largely unnoticed ratings downgrade on a slate of Paramount Pictures movies backed by hedge-fund money offers rare proof that such innovative packages have proved to be wobbly investments.
The Melrose I fund, established in 2004, was cut six grades by Moody’s Investor Service from an investment grade "Baa2" to the speculative "B3" rating. The downgrade, announced October 21, could trigger higher interest payments to lenders, and will surely lower the value of debtholders’ bonds.
The fund is backed by a partial ownership stake in 26 Paramount films released during 2004-05. So, lead underwriter Merrill Lynch and other senior debtholders will maintain a minority hold on those assets until they can secure full repayment on their loans or Paramount buys out their equity positions.
Melrose I was crafted during the regime of Paramount chief Sherry Lansing, whose reign atop the Viacom Inc-owned studio ended in 2004 amid a lengthy commercial dry spell. That year, the studio released such iffy features as "The Stepford Wives," "Sky Captain and the World of Tomorrow" and "Alfie," though Paramount has never acknowledged publicly which of its pictures were funded by Melrose I.
Bloomberg – Credit markets have fallen so far that they are providing a "once in a lifetime opportunity," and investors are still selling.
Prices of loans rated below investment grade declined to a record low 66.1 cents on the dollar, virtually guaranteeing investors get their money back, based on historical recovery rates, according to data compiled by Standard & Poor’s. Yields on corporate bonds show investors expect 5.6 percent of the market will go bust, the highest default rate since the Great Depression, according to Christopher Garman, chief executive officer of debt research firm Garman Research LLC in Orinda, California.
While central banks injected $3 trillion into the global economy, credit markets are tumbling because banks are clamping down on lending, forcing investors to unload assets they bought with borrowed money. The Federal Reserve said Aug. 11 that its quarterly survey shows most "domestic institutions reported having tightened their lending standards and terms."
New York (HedgeCo.Net) – JPMorgan Chase & Co. has purchased Washington Mutual’s branch network for $1.9 billion, making them the largest U.S. bank by deposits. The deal was encouraged by the U.S. government after consumers withdrew over $16 billion from the nation’s largest savings and loan in the latter half of September.
WaMu was having trouble finding a buyer after the Treasury’s proposed $700 billion bailout package created reluctance among would-be investors. Others companies said to have been considering an offer included Citigroup and Wells Fargo.
Many believed that WaMu was next in line to sink thanks to over $180 billion in outstanding mortgage-related loans and the paranoia of a pending liquidity crunch. On top of that, Standard & Poors once again cut WaMu’s ratings to CCC from BB-, though the company was quick to quell any fears associated with the downgrade.
"Washington Mutual Bank’s deposit rating from Standard & Poor’s continues to be investment grade and it is important to note that Standard & Poor’s rating actions do not affect the safety of customer deposits, which are insured up to the limits allowed by the FDIC," said WaMu in a recent statement.
Washington Mutual continued to deny rumors of any problems. The bank recently stated they had over $50 billion in liquidity despite being hit hard by the subprime mortgage fallout.
It was just a few months ago that WaMu rejected a bid from JPMorgan for about $4 a share, even after JPMorgan urged the bank to consider a deal before the economy got worse.
JPMorgan, who also acquired Bear Stearns earlier this year, will not inherit WaMu’s liabilities, including claims by shareholders and subordinated and senior debt holders. By purchasing WaMu, Chase can now increase their presence on the West Coast and in Florida.
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) – While the U.S. Treasury has done all it can to stave off rumors of a government bailout of Fannie Mae and Freddie Mac , some say the inevitable rescue is bound to take place after attempts to raise capital for the two mortgage giants have proved futile.
Preferred shares of the two companies are trading as low as 19 cents on the dollar, fueled by assumptions that their dividends will be suspended. This belief was the reason behind Moody’s recent ratings downgrade of their preferred stock to Baa3, the lowest possible investment-grade. Meanwhile, shares of both companies have experienced month after month of sharp declines, with Freddie down 93 percent and Fannie down 89 percent since November.
Together, the two companies account for over $5 trillion of outstanding U.S. mortgages. As the number of foreclosures reached record heights thanks to defaults on mortgages by subprime borrowers, Freddie Fannie have taken a beating since last summer, writing down almost $15 billion and forcing some to believe they will not be able to weather this housing crisis without the help of Uncle Sam.
Both Freddie and Fannie make money by offering mortgage-backed security bonds to investors. By selling these bonds, they assume the risk involved in the repayment of these loans. In exchange, they get to keep a guarantee fee that investors pay upon purchasing the bonds. It is easy to see, then, how the two companies that were believed to be “too big to fail,” started to experience problems. As more and more borrowers were unable to pay their mortgages, the responsibility fell on Freddie and Fannie. As they tried to stay afloat in their sea of debt, values of their securities started to plummet.
Recent attempts to try and find investors have been unsuccessful. Hedge funds like the Carlyle Group and Blackstone both expressed interest, only to rescind until further action by Treasury Secretary Henry Paulson.
"I think it starts with the constant doom and gloom, which makes investors quick to react when there is any sign of trouble ahead, and rightfully so," explains Michael Facchini, Portfolio Manager for Chicago-based Regent Global Funds. "Right now, investors are only interested in the cream of the crop when it comes to the MBS markets."
Federal Reserve Chairman Ben Bernanke has spoken several times about increased regulation of the companies, thanks to the widespread belief that Freddie and Fannie are government-backed. While both were created by Congress in an effort to increase homeownership and profits through the sale of their mortgage backed securities, they are in no way guaranteed by government funds.
In July, the Treasury and Federal Reserve outlined a plan to save Fannie and Freddie in order to prevent any chance of a Bear Stearns-like debacle. Among the suggestions, Paulson’s plan allowed for the Treasury to purchase shares of the two companies, should it prove to be necessary. That time has come, with some estimating the government may have to purchase about $60 billion worth of preferred shares.
Shares of Fannie Mae closed on Monday at $5.19, up 4 percent, while Freddie Mac rose 17 percent to close at $3.29.
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
Telegraph.co.uk – BAA is in urgent talks with a hedge fund client of investment bank UBS that is threatening to scupper the airport operator’s proposed £7.65bn refinancing.
As today’s deadline for bondholders to vote through a crucial part of the deal nears, the hedge fund was last night still refusing to accept BAA’s terms for transferring more than £225m of bonds into a new financing structure.
BAA is seeking agreement from holders of £4.7bn of bonds to "migrate" their debt into a new investment-grade, ring-fenced structure backed by Heathrow, Gatwick and Stansted airports. Only if the bondholders agree to such "migration" can BAA begin to draw the £7.65bn of fresh loans put in place by a nine-strong banking syndicate.
Reuters- Investors betting on Latin America should be overweight Brazil, the region’s top economy, at the expense of exposure to Argentina, Mexico and Chile, a Credit Agricole Asset Management (CAAM) executive said on Monday.
They should also be overweight the region’s energy and telecom firms, while limiting exposure to consumer discretionary and IT plays, added Stephane Mauppin-Higashino, a product specialist with the 481.7 billion euro fund house. Brazil’s Bovespa index .BVSP hit a record high last month after rating agency Standard & Poor’s lifted Brazil’s credit rating in April to much-coveted investment-grade status.
West Palm Beach (HedgeCo.Net)- Hedge fund manager Jupiter Asset Management announced the launch on June second 2008 of the of the Jupiter Strategic Bond Fund.
The new fund is Sterling denominaterd with a 4% initial fee and 1.25% as annual management charge. The minimum investment is a lump sum of £500 ($896.2), or monthly saving of £50 ($98.6).
The Fund, which has received approval from the FSA, is aimed at investors with a medium to long term outlook seeking income with potential for capital growth. The fund, which has a target yield of 7%, will offer a wide spectrum in terms of appetite for risk, with the ability to switch from a conservative to aggressive stance depending on circumstances.
The Fund will be managed as a ‘go-anywhere’ fund, aiming to achieve long term capital growth from investing in all areas of the credit ratings market. It will be managed by Ariel Bezalel, who has 10 years experience working in credit markets at Jupiter. He currently manages the fixed interest components of three unit trusts – Jupiter Global Managed, Jupiter High Income and Jupiter Monthly Income.
Bezalel said, "The investment grade market is pricing in a severe recession and the high yield market is pricing in a sharp rise in defaults. Whilst I am cautious on the economic outlook, current valuations seem to offer potentially handsome rewards for the risk. This situation, in my view, presents the most compelling investment opportunity in credit we have seen for many years."
Jupiter Unit Trust Managers Limited (JUTM) and Jupiter Asset Management Limited (JAM) are both are authorised and regulated by the Financial Services Authority. The group is collectively known as "Jupiter".
West Palm Beach (HedgeCo.Net)- Hedge fund manager Jupiter Asset Management announced the launch on June second 2008 of the of the Jupiter Strategic Bond Fund.
The new fund is Sterling denominaterd with a 4% initial fee and 1.25% as annual management charge. The minimum investment is a lump sum of £500 ($896.2), or monthly saving of £50 ($98.6).
The Fund, which has received approval from the FSA, is aimed at investors with a medium to long term outlook seeking income with potential for capital growth. The fund, which has a target yield of 7%, will offer a wide spectrum in terms of appetite for risk, with the ability to switch from a conservative to aggressive stance depending on circumstances.
The Fund will be managed as a ‘go-anywhere’ fund, aiming to achieve long term capital growth from investing in all areas of the credit ratings market. It will be managed by Ariel Bezalel, who has 10 years experience working in credit markets at Jupiter. He currently manages the fixed interest components of three unit trusts – Jupiter Global Managed, Jupiter High Income and Jupiter Monthly Income.
Bezalel said, "The investment grade market is pricing in a severe recession and the high yield market is pricing in a sharp rise in defaults. Whilst I am cautious on the economic outlook, current valuations seem to offer potentially handsome rewards for the risk. This situation, in my view, presents the most compelling investment opportunity in credit we have seen for many years."
Jupiter Unit Trust Managers Limited (JUTM) and Jupiter Asset Management Limited (JAM) are both are authorised and regulated by the Financial Services Authority. The group is collectively known as "Jupiter".
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
