Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.
+1 212 318 2000
Europe, Middle East, & Africa
+44 20 7330 7500
+65 6212 1000
Posted by: Matthew Goldstein on April 30
Let’s be clear: There’s nothing wrong with a group of hedge funds joining forces to push Chrysler into bankrupty because they didn’t like the terms the federal government was trying to get them to agree to. But it is a problem when the hedge funds lack the courage to publicly stand behind their vote.
Hours before Chrysler filed for bankruptcy, some of the hedge funds that voted against the deal to reduce Chrysler’s crushing debt burden issued a press release explaining their position. The release was signed by The Committee of Chrysler Non-Tarp Lenders. But it didn’t identify any of the 20 or so hedge funds that sit on this ad-hoc committee, or voted against the proposed debt-reduction package put together by the Treasury Department.
Talk about being unwilling to stand up for your convictions. If the hedge funds that voted against the deal believe they are in the right, then let them stand-up and be accounted for. Right now, the hedge funds hiding behind this committee look no better than the fan of a losing team who shows up to a game wearing a paper bag over his head.
President Obama, in a burst of anger, denounced the hedge funds that vetoed the Chrysler deal as a “small group of speculators.”
Now, the hedge funds may be wary of stirring up any more of Obama’s wrath. But it’s not as if the names of the 20 or so hedge funds that own Chrysler’s bank debt won’t eventually come out.
Indeed, some already are making their way into the headlines. The New York Times’ Dealbook blog reports: “Members of the committee include units of Oppenheimer Funds, Perella Weinberg Partners’ Xerion Capital Fund and Stairway Capital Management. JPMorgan Chase, which was keeping tabs on the votes from Chrysler’s secured lenders, obviously knows which hedge funds voted no.
BTW, I’m told that one of the biggest distressed investing hedge funds, Elliott Management, voted for the debt-reduction deal.
Meanwhile, the committee did find a press contact at the noted public relations firm Sard Verbinnen to field press calls. For the moment, the Sard flack isn’t commenting.
But some hedge fund defenders are willing to speak out. Ron Geffner, who specializes in working with hedge funds, isn’t representing any of the committee members. But he understands why they voted down the deal. “Fund managers are obligated to act in the best interests of their investors,” says Geffner. “Those fund managers probably feel that a bankruptcy filing would result in a higher return for their investors,” says Geffner.
That may all be true. But if the hedge fund managers really believe they are doing the right thing by their investors, then stand up and be counted. Until they do, this is the name we’re going to call this band of hedge funds: “The Paper Bag Crowd.”
Updated 5:14 PM (EDT)
OppenheimerFunds, to its credit, has now issued a statement explaining its decision to reject the Chrysler debt-reduction package. First, the money management firm points out that it represents the “interests of the thousands of small investors and their retirement plans that make up the majority of our mutual funds shareholders. The firm then goes on to say it “rejected the Government’s offers because they unfairly asked our fund shareholders to make financial sacrifices greater than the sacrifices being made by unsecured creditors.”
Updated 5:39 P.M.(EDT)
And now Perella Weinberg Partners’ Xerion Fund is weighing in too saying it no longer would vote “no” on the deal. In a statement, the investment firm says: “We believe that this is in the best interests of all Chrysler stakeholders, and our own investors and partners.”
Fair enough. Anyone else on the committee care to share their views with us?
BusinessWeek's Adrienne Carter, Jessica Silver-Greenberg, and David Henry deconstruct the mysteries of high finance, Wall Street, and hedge funds for pros and ordinary investors. E-mail them directly if you've got tips about big deals, a hedge fund, or even securities industry gossip.