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) – Less than one week after UBS and Citigroup were called upon to buy back over $30 billion in bad auction-rate securities, New York Attorney General Andrew Cuomo is forcing JPMorgan, Morgan Stanley and Wachovia to follow suit.
In a letter to the three banks, Chief of the Attorney General’s Investor Protection Bureau David Markowitz wrote, “Our investigation’s focus is shifting to the next group of market participants. Any resolution would need to address the same concerns addressed in the previous settlements.”
UBS was slapped with $150 million in fines and is being forced to buy back some $18.6 billion worth of the auction-rate securities. These securities, backed by municipal bonds and other debts, were sold under the assumption they were a safe investment. Instead, the $330 market collapsed in February, leaving investors and now the government, wondering if the banks were up front about the potentially high risks associated with such investments.
The probe launched by Cuomo will investigate 18 different banks. He is insisting that banks create auction-rate securities buyback programs for the customers who got stuck selling their securities far below par.
Citigroup also got slapped with a $100 million fine and had to deal with both state regulators and the Securities and Exchange Commission. They eventually agreed to buyback $7.3 billion worth of the securities from individual customers and small businesses. In addition, they must help over 2,500 clients sell about $12 billion of the securities.
Morgan Stanley has agreed to buy back $4.5 billion worth of the securities at par. According to the Wall Street Journal, Morgan Stanley will repurchase the securities beginning no later than September 30, from all charities and small to mid-size companies with accounts of $10 million or less that were purchased before February 13th of this year.
Merrill Lynch, in an attempt to quell the probe before it starts, offered last week to buy back about $10 billion in the auction-rate securities. However, Cuomo’s office stated that their plan didn’t contain certain “investor protection safeguards.” The Merrill case is currently under review in Cuomo’s office.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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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.
New York (HedgeCo.Net) – Eight people were arrested yesterday in London on suspicions of insider trading.
The city of London police and about 40 Financial Services Authority officials targeted workers at UBS and JPMorgan Cazenove, in what they are calling “a major ongoing investigation into insider dealing rings.”
It is believed that the suspected individuals shared price-sensitive information contained at the bank’s printing facilities that had not yet been made available to the public.
Ironically, Malcolm Calvert was indicted last week, also from Cazenove who allegedly used inside info to purchase huge stakes in companies that were rumored to be potential targets for takeovers from 2003-2005. It is unknown as to whether or not the two instances are related.
Names have not been released, but the FSA did confirm to the Financial Times that one of the men arrested was a junior member of UBS’s support staff in London. He is currently suspended while the investigation unfolds.
As for the others, the FSA has only confirmed that they are men between the ages of 27 and 48. No word yet on how much money the individuals are thought to have gained through the insider deals.
This marks the third insider trading case filed by the FSA this year. The City of London police were asked to get involved, as the FSA does not have the authority to arrest.
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
Financial Times- Even as politicians and regulators accuse hedge fund short-sellers of trying to bring down banks in Britain, the US and Australia, top hedge managers are providing rescue capital to prop up the ailing corporate world.
The latest bail-out backed by hedge funds is the £4.5bn cash raising by Britain’s Barclays, where five big managers are ready to provide just under 10 per cent of the new money – with sovereign wealth funds providing the majority of the rest.
Hedge funds are important backers of the current wave of rights issues, too, according to investment bankers close to the deals. In spite of publicly-declared short positions – where hedge funds hope to profit from falling prices – several big hedge funds are sub-underwriting the rescue rights issue by HBOS, the biggest mortgage lender, guaranteeing to buy the shares if the rights are not taken up.
"Although equity underwriting currently looks difficult, hedge fund participation in this market has increased as their asset base has grown," says Jim Renwick, vice-chairman at UBS. "This has been the case for more than five years now."
FRANKFURT (Reuters)- UBS has wrapped up a 16 billion franc rights issue, the Swiss bank’s second effort to resuscitate finances that have been ravaged by the global markets crisis.
It is the latest in a line of major banks including Britain’s Royal Bank of Scotland and HBOS and France’s Credit Agricole to go cap in hand to shareholders. In total, European banks are raising more than $40 billion from shell-shocked investors.
UBS said on Friday 99.4 percent of the issue was taken up but one analyst pointed to what he said was UBS’s weak stock performance during the rights trading. "It has been weak ever since they announced the rights issue," said Peter Thorne, an analyst with Helvea.
Times Online- The Financial Services Authority took the unprecedented step of pressuring Britain’s five biggest banks into supporting the revised rescue capital-raising at Bradford & Bingley last week, The Times has learnt. HSBC, Royal Bank of Scotland, Barclays, Lloyds TSB and HBOS are understood to have each agreed to sub-underwrite £20 million-worth of the reworked £258 million rights issue.
The banks agreed to step in when Citigroup and UBS, the lead underwriters, could find no one to whom they could lay off some of the risk. Underwriters typically pass on some of the risk to institutions known as sub-underwriters. The FSA, worried that too much Bradford & Bingley stock would be left with UBS and Citigroup, which are already under pressure, decided in the middle of last week to ask the big five to take some of the risk.
Bloomberg- Hunter Shively, global co-head of UBS AG’s commodities business for the past seven months, is resigning to join a start-up hedge fund that is raising money to trade energy futures.
Shively, 38, will stay on for two months to oversee the handover of the commodities unit’s North American energy operations, Jerker Johansson, head of UBS’s investment bank, said today in a memo to employees. Todd Morakis, who was named commodities co-head with Shively in November, will run the Stamford, Connecticut-based unit, according to the memo, which was confirmed by Sarah Small, a spokeswoman for UBS in London.
UBS, which has had the biggest net losses of any bank from the U.S. subprime-mortgage crisis, said in January it will reduce trading in power and natural gas in Canada, and pull out of some European energy markets. Shively plans to join Sasco Energy Partners LLC, a Westport, Connecticut-based firm that is looking to raise $750 million, according to a person familiar with the matter who declined to be identified.
West Palm Beach (HedgeCo.Net) – One month after Appaloosa Management backed out of a $2.55 billion deal to help lift Delphi out of Chapter 11, the Troy auto parts supplier is suing the hedge fund for damages.
"Our efforts to emerge were seriously undermined when we failed to close because of the actions of Appaloosa and the other plan investors. We hold them accountable for the harm they have caused to Delphi and our stakeholders," Delphi’s David Sherbin said in a statement on Friday.
Appaloosa, along with other big names like Goldman Sachs, Harbinger, UBS, Merrill Lynch and Pardus, were all part of a commitment to rescue Delphi, and had planned to give the company a big chunk of the $6.1 billion needed to refinance. But as the April 5th deadline got closer, more and more issues sprung up that made it seem increasingly unlikely that the Delphi was going to close the deal.
Appaloosa continued to assure shareholders that were not going to walk away, saying that if they had wanted to, they would’ve done so by now. One day before the deadline, Appaloosa finally turned its back, saying that Delphi had breached several agreements, and were becoming too reliant on former parent company GM, who also promised a $2.8 billion piece of the puzzle.
“Delphi believes that defendants backed out of the transaction simply because they decided they did not like the economics of the deal they had agreed to, and that they never intended to close if the deal was underwater," the company said.
This lawsuit isn’t the first that Delphi has waged against Appaloosa. Earlier this year, Delphi accused management at the hedge fund of short-selling their stock, with the anticipation that they knew the exit deal would fall through.
The amount in damages that Delphi is seeking has not been disclosed.
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
