(Bloomberg) Hedge fund Solus Alternative Asset Management sued homebuilder Hovnanian Enterprises Inc. and Blackstone Group’s GSO Capital Partners, accusing them of manipulating the market on insurance tied to Hovnanian’s debt. According to Solus, GSO was close to suffering “massive” losses after betting that Hovnanian would default on its debt. The only way for GSO to avoid the losses was if the homebuilder defaulted on existing debt and issued a certain type of new debt, Solus claimed. Because that was unlikely to occur, GSO bribed Hovnanian to do so, Solus said in the complaint. Solus said the illegal scheme could cost it and other sellers of Hovnanian credit default swaps — which investors use as a hedge against defaults — hundreds of millions of dollars.
Hedge Fund Sues Hovnanian, Blackstone’s GSO Over ‘Manipulation’
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