Hedge Fund News Wrap: Week Ending 8/29/14

Hedge Funds Sue for Argentine Debt Payment in London

finance1A group of hedge funds are now suing Bank of New York Mellon in London over Argentina’s debt payment.

In June, Argentina deposited $539 million for its interest payment with BNY Mellon. However, U.S. Federal Judge Thomas P. Griesa barred the bank from transferring the money to the holders of Argentina’s restructured debt unless the country also paid hedge fund holdouts from its 2001 default.

The group of hedge funds suing BNY Mellon, which include George Soros’ Quantum Partners, and J. Kyle Bass’ Hayman Capital, is seeking 226 million euros in interest payment.

The suit, which was filed in London’s Chancery Court, alleges that Bank of New York’s “actions have been designed consistently to protect its own interests without reference to the interests” of the bondholders.

Collectively, the plaintiffs hold more than 1.3 billion euros in Argentine debt, and have argued that the interest payment owed to them is subject to British law and not the United States injunction.

Argentina, which has defaulted for a second time since 2001, started the process of removing BNY Mellon as its trustee through legislation, replacing it with an Argentinian bank, Banco de la Nacion.

According to The Wall Street Journal, BNY Mellon has declined to comment on the suit, but stated, “We will continue to comply with the court order.”


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The Wall Street Journal



Indian Hedge Funds Faring the Best Globally

Indian-focused hedge funds have been the world’s best performers this year, as many anticipate Prime Minister Nardendra Modi to introduce reform that will revive Asia’s third-largest economy.

According to the Eurekahedge Index, Indian-focused hedge funds have returned 26 percent through July—a stark contrast from hedge funds investing in Asia, which have returned 3.5 percent during the same period of time. Funds investing in greater China have returned 1.9 percent, 1.2 percent for Japan, 3.8 percent for North America, and 1.1 percent for Europe.

The India Insight Value Fund is the India’s best performer, which returned 78 percent through the end of July. Mayur Hedge Fund and Malabar India follow closely behind, returning 49 percent and 48.6 percent through July, respectively.

“Times have changed and we have Modi, the hero,” said Samir Arora, head of Helios Capital Management, based in Singapore. “We have seen a massive change in interest. Next year can be very big for India.”

According to Bloomberg News, Modi, who secured the largest election victory since 1984, has vowed to restore economic growth, control inflation and the budget deficit, and revive stalled projects to boost investor confidence.


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Bloomberg News





SEC Adopts Rule for Asset-Backed Securities

The Securities and Exchange Commission has adopted new rules for asset-backed securities, which affect the disclosure, reporting, and offering of these securities, to better protect investors and enhance transparency in the securitization market.

The new rules will require loan-level disclosure of certain assets, including residential and commercial mortgages, and automobile loans. In addition, investors will have more time to review and consider a securitization offering.

“These are strong reforms to protect America’s investors by enhancing the disclosure requirements for asset-backed securities and by making it easier for investors to review and access the information they need to make informed investment decisions,” said SEC Chair Mary Jo White. “Unlike during the financial crisis, investors will now be able to independently conduct due diligence to better assess the credit risk of asset-backed securities.”

During the financial crisis of 2008, holders of asset-backed securities suffered significant losses as many investors were not fully aware of the risk in the underlying mortgages within the bundle, and relied on credit ratings assigned by rating agencies. In many cases, rating agencies failed to accurately assess and rate the securitization structures.

The SEC has also adopted new requirements for issuers, underwriters, and third-party due diligence services, which will promote transparency of the findings and conclusions of third-party due diligence regarding the securities.


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Think Advisors



Hedge Funds Press Ann Taylor to Explore Sale

Activist investors, including Engine Capital hedge fund Red Alder, are pressing Ann Inc. to explore the option of selling its store chain, Ann Taylor.

In a letter made public, Engine Capital and Red Alder evaluated the company to be worth $50 to $55 a share to an acquirer, or 33 to 46.5 percent premium to its stock price as of last Friday.

“Ann is an incredibly suitable candidate for a private equity acquirer because of its consistent over the years, ability to future improve margins, significant and growing free cash flow generation,” the firms wrote in the letter. “A large international retailer could take Ann’s iconic brands and significantly expand their presence internationally at a faster pace.”

In response to the letter, Ann Inc. stated that it welcomed “open communications with its shareholders and values constructive input.”

Pushing for change would not be an easy task. Engine Capital and Red Alder have a relatively small stake in Ann compared to Golden Gate Capital, which has been Ann’s largest shareholder since March with a 9.5 percent stake. According to Reuters, the private equity firm stated that while the stock was “significantly undervalued,” it had no intentions to push Ann to sell itself and that it was impressed with the company’s management.


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Bloomberg News