Tuesday, July 31, 2007

Macquarie's Fortress Funds Fall Amid Subprime Rout

No wonder i havn´t heard the word "contained" for a few days now ....Except from a few unimportant Fed members :-)

Kein Wunder das man in den letzten Tagen das Wort "contained" immer weniger hört.....Mit Ausnahme von einigen Mitgliedern der Fed :-)

Aug. 1 (Bloomberg) -- Macquarie Bank Ltd., Australia's largest securities firm, said investors in two of its high-yield funds may lose 25 percent of their money as a rout in the U.S. sub-prime market spreads.

Macquarie Fortress Investments Ltd., with $873 million of funds, was forced to sell assets to avoid breaching its loan agreements, the firm said in a statement. The company's notes slumped while shares in its parent headed for their biggest drop in 5 1/2 years.

Funds are being caught in a downward spiral because banks are forcing borrowers to sell assets as the value of collateral declines. Bear Stearns Cos. halted redemptions from a third hedge fund yesterday while Sydney-based Absolute Capital and Basis Capital Fund Management Ltd. are trying to avoid making sales at distressed prices.

Asia Genesis Management, a hedge fund based in Singapore that manages about $450 million, today said it has increased cash holdings to 95 percent of its assets to avoid losses.

Bear Stearns's Asset-Backed Securities Fund, with about $900 million invested in asset-backed securities, including mortgage bonds, suspended redemption after investors demanded their money back, spokesman Russell Sherman said.

Fortress notes, which trade on the Australian Stock Exchange, slumped 23 percent to 58 Australian cents at 3:15 p.m. in Sydney. The company aims to pay investors a 10.1 percent annual yield by investing in loans to companies with good records of repaying debt, according to a prospectus dated Feb. 3, 2006, for a third series of notes.

Leveraged Investments
Fortress uses leverage of 4.5 to 6.5 times and allows individual investors with as little as A$5,140 ($4,350) to spend to buy the notes.

Macquarie Bank's shares headed for their biggest fall since February 2002 with a 10 percent decline to A$74.61. They have slumped 19 percent over the past two weeks, wiping A$4.6 billion from the company's market value amid concern that global takeovers may decline and prices will fall in debt markets. Shares of Goldman Sachs Group Inc. and Bear Stearns dropped 14 percent and 15 percent in July.

The stock of other Australian investment-related companies fell. Babcock & Brown Ltd., the nation's second-biggest investment bank, slid 7.8 percent and Allco Finance Group Ltd., a Sydney-based manager of energy and property assets, fell 6.5 percent.

Prices Fall
The average price of assets in the Fortress portfolios had fallen by 4 percent as at July 30, Lucas said in the statement. The value of the assets may decline a further 20 percent to 25 percent, he said. The funds had $873 million in assets on May 31.

Credit-default swaps based on $10 million of Macquarie Bank bonds rose $13,000 to $59,000 late yesterday, according to prices from National Australia Bank Ltd. That's up from $22,000 on July 10. Investors use the five-year contracts to speculate on credit quality. The costs, or spreads, increase as the perception of creditworthiness deteriorates. AddThis Feed Button

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