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.
Private Equity Hub – A group of hedge funds that provided bankruptcy funding to Delphi Corp on Monday won a high-stakes auction to take control of the auto parts supplier, scuttling a rival deal brokered by the Obama administration.
Delphi’s board of directors and GM both offered their support for the proposed deal that would hand the company’s assets over to its debtor-in-possession lenders in exchange for their forgiveness of nearly $3.5 billion in loans.
The result, announced by Delphi late Monday, came after a two-day auction in New York.
Gulf News – Short-selling, one of the few tactics that made money for hedge funds in 2008, has become a risky bet as prospects for equities have improved, while getting hold of stock to sell is harder as lenders shun weak funds.
Some hedge funds have already changed tactics and are simply buying cheap stocks, wary of getting burnt if a stock they are shorting announces unexpectedly good earnings and the share price spikes – a real possibility in an improving economy.
High-profile hedge fund manager Philippe Jabre said he had no short positions because it was "too dangerous", although in future shorting could prove a better trade.
Caribbean Net News – The trustee liquidating Bernard Madoff’s investment-advisory business has asked a judge for a default ruling against Harley International Ltd, arguing that the Cayman Islands hedge fund failed to respond to a lawsuit accusing it of taking $1.07 billion in fake profit from Madoff’s firm.
If trustee Irving Picard’s July 2 request is granted, the hedge fund, run by Cayman Island-based Euro-Dutch Management Ltd, would be ordered to return money it allegedly withdrew during the six-year period before New York-based Bernard L Madoff Investment Securities LLC collapsed in a $65 billion fraud. Harley is being liquidated in a Cayman Islands court.
CNBC – Attorneys for a hedge fund are asking for the appointment of an examiner in horse track owner Magna Entertainment’s Chapter 11 bankruptcy case.
A hearing was scheduled Tuesday on the request by Greenlight Capital Offshore Partners, which wants an investigation of ties between Magna and its parent company, known as MID.
MID has played a dual role as both a potential bidder for MEC assets and one of its primary lenders.
Greenlight, an unsecured creditor of Magna as well as a large shareholder in MID, is concerned about the fairness of any asset sale.
Reuters India – Lenders to French roofing company Monier Group have approved a restructuring deal that sees a group of debt investors take control of the company, a source with knowledge of the situation said on Thursday.
The deal is one of the largest "loan to own" restructurings in Europe, and has been led by debt investors Apollo Management [APOLO.UL], TowerBrook and York Capital.
Reuters – Hedge funds that provided bankrupt U.S. auto parts maker Delphi with debtor-in-possession (DIP) financing are not getting access to the firm’s books, hindering their ability to make a takeover offer, the New York Post reported, citing a person familiar with the situation.
The lenders are led by hedge fund Elliott Associates, the paper said.
In case they do not get access to Delphi’s books soon, the lenders may approach the judge handling the bankruptcy case to intervene, a source told the paper.
Hedge funds have begun to raise leverage levels again in recent weeks as prime brokers and other lenders become bolder about extending credit in more stable markets, a lawyer specializing in the sector said on Tuesday.
Henry Bregstein, attorney at law at Katten Muchin Rosenman, said that some strategies, such as multi-strategy funds and funds of funds, had tentatively started to increase leverage to as much as 50 percent within the last six weeks.
"We’re starting to see some leverage come back into the hedge fund industry," he told Reuters on the sidelines of the GAIM hedge fund industry conference here.
"With the stronger funds, we’re beginning to see some working on new leverage transactions… Markets appear to have stabilised."
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.
Washington Post – The government-orchestrated sale of Chrysler to Italian carmaker Fiat is facing a fresh legal challenge from some of the American carmaker’s lenders, which are trying to take the fight to federal district court.
Pension funds representing Indiana teachers and police officers, and a state construction fund, filed Wednesday to have the Chrysler bankruptcy proceedings heard by the district court, which has authority over the bankruptcy court.
The funds contend that the automaker’s sale violates their rights as senior secured lenders to Chrysler, and that under the proposed sale, they would recover less than junior lenders. They also think the government does not have the authority to use federal rescue money designated for banks to bail out Chrysler.
Straits Times – Hedge fund executives at the conference said Mr Obama’s deal undercut bankruptcy court rules that have long given priority to secured lenders. The White House move and its combative stance with hedge funds may keep some managers on the sidelines or chill investment in some companies.
Mr Gary Kaminsky, former managing director at Neuberger Berman, told conference members that government involvement began last March with the forced sale of Bear Stearns to JPMorgan Chase and has not let up since.
‘You have to assume the government will be involved. You have to assume the free market is not as free as it was in the past and won’t be for the next 20 years,’ Mr Kaminsky said.
The Associated Press – Relations between President Barack Obama and U.S. corporate leaders have grown tense in recent weeks, with business groups bristling over his sharp rebukes of lenders and multinational companies in particular.
Executives and trade groups that praised Obama’s outreach during his post-election transition period say they have felt less welcome since he took office in January. More troubling, they say, are his populist-tinged, sometimes acid critiques of certain sectors, including large companies that keep some profits overseas to reduce their U.S. tax burden.
On Thursday in New Mexico, Obama chastised the credit card industry for sharply raising interest rates or fees with hard-to-find notice. He said consumers should be protected from "all kinds of harsh penalties and fees that you never knew about." Some of the dealings by credit card companies, he said, "are not honest."
BusinessWeek – The list of dissidents is much smaller than the original 20 or so hedge funds that veoted a pre-bankruptcy deal to reduce Chrysler’s outstanding secured debt. The list of hedge funds that are still members of the opposition group calling themselves Chrysler Non-Tarp Lenders is down to just six funds. In all, the funds control $295 million of Chrysler debt, a far cry from the nearly $1 billion the original group of 20 had controlled.
The dissidents included funds managed by Schultze Asset Management, Arrow Hedge Partners, Stairway Capital, OppenheimerFunds, Foxhill Capital Partners and Group G Partners. Early on, Stairway Capital and Oppenheimer had been identified as leaders of the Chrsyler holdouts, but the others funds had not.
