LTCM bis , je sais pour vous, mais pour moi ce qui se passe en ce moment sur les marchés me fait penser++ à la faillite du hedge fund LTCM qui a déclenché un plan de sauvetage drastique de la fed
et fort malmené notre secteur à l'époque:AIG = nouvel Enron?+ rumeurs persistentes d'un big hedge fund en difficulté
From: "cxpowell" <GATAComm@...>
Date: Thu May 12, 2005 6:29 am
Subject: Former silver market player AIG is starting to look like another Enron cxpowell
Details Emerge on Obscure Barbados Reinsurer Tied to AIG
By Theo Francis, Glenn R. Simpson,
and Charles Fleming
The Wall Street Journal
Thursday, May 12, 2005
When American International Group Inc. disclosed that it would slice
about $2.7 billion, or 3.3%, off its net worth because of accounting
issues, the biggest single chunk stemmed from dealings with an
obscure Barbados company.
Now, some details are emerging about Union Excess Reinsurance Co.,
including names of some of its investors during the 1990s. Investor
lists from then show seven insurers outside the U.S., including a
unit of French insurance titan AXA SA, an insurer tied to Chevron
Corp. and two small Bermuda operations, according to people familiar
with the lists.
The details shed light on relationships among the companies and
individuals with roles at Union Excess. American International Group
is a big customer of several Union Excess investors, some of which
also have ties to other offshore ventures that have drawn regulatory
State and federal authorities investigating AIG's accounting are
interested in Union Excess's structure. AIG attorneys have said AIG
intentionally misled regulators about at least one transaction with
Union Excess and about AIG's control over another offshore firm,
Richmond Insurance Co. AIG says it is cooperating with all
AIG's transactions with Union Excess account for about $1.1 billion
of the expected hit to its net worth. In detailing its accounting
woes in recent statements, the big insurer said its "control over
certain transactions undertaken directly or indirectly" with the
reinsurer meant it couldn't treat those deals as reinsurance.
Insurers buy reinsurance to spread the risk of losses from the
policies they sell. In doing so, insurers move claims liabilities
off their own books. To count as reinsurance, the transaction must
transfer significant risk of loss to the reinsurer.
In addition, AIG said it should consolidate Union Excess's results
with its own, because of "certain facts and circumstances related to
the formation of Union Excess," as well as because of ties between
Union Excess and Starr International Co., a Bermuda investment
company historically run by AIG executives. Starr provided a
guarantee of sorts that protected "a significant portion of the
ownership interests of Union Excess shareholders."
Chevron acquired its Union Excess stake through its merger with
Texaco -- which invested through a Bermuda-based insurance unit,
Heddington Insurance Ltd., in 1993, the year Union Excess was
founded, Chevron spokesman Andy Norman said. Records show Heddington
also owned about 10% of Richmond, another offshore reinsurer whose
financial results AIG has said it will consolidate with its own.
Heddington's former president and chief executive is Robert C.
Golden, an insurance-industry veteran who previously headed Texaco's
risk operations and served on boards, including at XL Capital Ltd.
Mr. Golden also is listed as a 1% owner of Richmond in a 1986 share
register obtained by newsletter KYC News.
"Heddington has never used Union Excess for reinsurance purposes,"
Mr. Norman said, but it isn't clear why Heddington invested in Union
Excess. Mr. Golden couldn't be reached to comment yesterday.
Another investor, the people familiar with the investor lists said,
has been Western General Insurance Co., a Bermuda-based insurer
indirectly owned by Chicago's Pritzker family, the Hyatt Hotel
chain's owners. Western General's president and general manager,
insurance-industry veteran John L. Marion, served on the boards of
both Union Excess and Richmond during the early 1990s, and was a
vice president of Richmond, according to biographical material in a
prospectus for another company. Mr. Marion didn't return calls to
A person answering Western General's telephone said the closely held
firm doesn't respond to press inquiries. A Pritzker family attorney
couldn't be reached to comment.
U.K. insurer Aviva PLC acquired "passive stakes" in Union Excess and
another Barbados reinsurer with ties to AIG -- now-defunct Coral
Reinsurance Co. -- in 1994, upon acquiring insurer Abeille from
French conglomerate Suez SA, an Aviva spokeswoman said. The Union
Excess stake has since been reduced to 3% from 6%, and the Coral
stake was "very small," she said.
Coral was set up by investment-banking firm Goldman Sachs Group Inc.
in the mid-1980s to sell reinsurance to AIG. AIG came under scrutiny
from state insurance regulators in the mid-1990s for allegedly
undisclosed ties to Coral, a relationship AIG defended as
legitimate. But as scrutiny mounted, AIG unwound its ties to Coral.
AXA also owns about 3% of Union Excess, acquired in 1995 when it
bought an Abeille reinsurance unit, said spokeswoman Clara Rodrigo.
AXA doesn't currently do business with Union Excess, she said.
Another investor, Overseas Partners Ltd., formerly an offshore
reinsurer for United Parcel Service Inc., didn't return calls; a UPS
spokesman declined to comment. A spokesman for Bank of Bermuda,
parent to investor Woodbourne Insurance Ltd., declined to comment. A
representative for another investor, Antares Ltd., couldn't be
reached. Bermuda incorporation records say Woodbourne was dissolved
in late 2000.
AIG, the world's biggest reinsurance buyer, does business with at
least three Union Excess investors. Of $885 million in reinsurance
proceeds that Western General was obligated as of Dec. 31 to pay to
U.S. insurers, 90% was owed to AIG, state regulatory filings show.
About 38% of such payments from Overseas Partners was owed to AIG,
and about 12% of Heddington's, the records show.
Hedge fund rumors knock markets;
Widespread jitters focus on GM, convertible bonds
By Alistair Barr and Kathie O'Donnell
Tuesday, May 10, 2005 http://www.marketwatch.com/news/yhoo/story.asp?
SAN FRANCISCO -- Rumors of trouble in hedge fund land gained enough
momentum Tuesday to sway broader markets and pressure shares of some
of the world's largest banks.
Speculation swirled that a couple of hedge funds were facing trouble
as a result of their exposure to General Motors Corp. bonds. Last
week, Standard & Poor's cut its credit rating on the world's largest
automaker to "junk" status.
The implications of the downgrade on hedge fund positions in credit
derivatives also weighed on the minds of investors and traders.
Equities and the U.S. dollar fell while Treasury bonds and gold
climbed as investors looked for relatively safe places for their
A Wall Street Journal report Tuesday highlighting recent troubles in
the hedge fund industry also fueled concerns.
Deutsche Bank slid 3.3% amid talk that the bank is the prime broker
for QVT Financial L.P., one of the hedge funds rumored to be in
distress. A London-based spokeswoman wouldn't comment.
Other investment banks with sizeable hedge fund brokerage businesses
also dipped: Bear Stearns slid 3.4%; Goldman Sachs shed 3.2%, and
Morgan Stanley declined 2.6%.
QVT Financial, investment manager of the QVT Funds, said speculation
that a QVT hedge fund was one of those in trouble is "categorically
"We were up 2.6% year-to-date through April, and we are up even
slightly more in May at present," said Dan Gold, chief executive of
QVT. "We welcome further difficult market conditions because we
think they will present buying opportunities to strong funds such as
Gold added, however, that QVT believes "the current conditions in
convertible and structured credit markets will pose difficulties for
many of our competitors."
Other hedge funds mentioned by market professionals were GLG
Partners, a London-based hedge fund, and Highbridge Capital, a $7
billion New York firm majority owned by J.P. Morgan.
Spokesmen for Highbridge and J.P. Morgan declined to comment.
GLG, which has reportedly been in talks with Lehman Bros. about
being acquired, also wouldn't comment.
Tim Ghriskey, chief investment officer at Solaris Asset Management,
a New York-based investment firm that offers hedge funds, said he
heard speculation Tuesday morning that a large hedge fund was
unwinding positions in GM bonds and may have taken losses in those
Still, Ghriskey said rumors of hedge fund blowups are "very common."
So-called arbitrage hedge funds may have been hurt the most by
General Motors' recent troubles.
Arbitrage involves ironing out price anomalies between related
One common type of trade is to short the equity and buy the bonds of
a company that's been downgraded to junk status.
In theory, if the company files for bankruptcy, its stock would be
worth nothing, while its bond holders may be entitled to a portion
of the firm's assets.
Last week, this type of trade involving GM stocks and bonds would
have suffered a double hit.
When S&P cut its rating on the carmaker's debt, GM bonds fell. But
the company's shares also rose when Kirk Kerkorian announced he
would bid for a stake in the firm.
As the largest issuer of convertible bonds, GM's troubles
highlighted the recent struggles of hedge funds operating in that
Convertibles pay a coupon like traditional corporate debt notes, but
also give investors the chance to convert their holdings into stock
of the company at a set price in the future.
Hedge funds are big players in this market and many follow
strategies known as convertible arbitrage, which involves ironing
out differences between the value of convertible bonds and the
stocks to which the debt is linked.
Hedge funds that trade convertible bonds lost 3.5% in April on
average, leaving them down 6.3% so far this year, according to
Hennessee Group, an industry consultant which tracks performance.
Overall, hedge funds lost 1.8% in the first four months of 2005,
according to Hennessee's Hedge Fund Index, which tracks the
performance of about 900 managers overseeing at least half of the
capital in the industry.
Several convertible arbitrage managers took a beating in April as a
result of widening credit spreads, problems at General Motors and
redemptions from hedge fund investors, Hennessee said.
That's created "the worst convertible arbitrage environment since
1994," the consultant added.
GM's credit downgrade may have triggered problems in structured
credit markets too.
Structured credit products use derivatives to shift credit risk from
a person or entity looking to buy protection onto sellers of
The products include collateralized debt obligations and credit
default swaps that can cover a basket of different companies,
according to Randall Dodd, director of the Financial Policy Forum, a
non-profit research institute set up to study the regulation of
Credit default swaps are a form of insurance against corporate debt
Providers of this credit insurance have to pay in the event of a
default or bankruptcy. However, depending on how products are
structured, they may also have to pay if there's a credit downgrade
or credit spreads widen beyond a certain point, Dodd said.
Because GM has sold so many bonds, it's usually a part of these
baskets of credit risks, he added.
"People that have sold protection now are taking a beating because
they have GM all over the place," Dodd said.
Standard & Poor's cut its ratings Tuesday on six synthetic
collateralized debt obligations arranged by Deutsche Bank
after "negative credit rating migration within the underlying
reference portfolios of each transaction."
S&P didn't say what credit rating changes triggered the move,
however Dodd said it was likely related to GM and Ford debt being
cut last week to "junk" status.
Hedge funds are private investment partnerships that can bet on
falling as well as rising prices. Sporting track records of steady
annual returns in both up and down markets, the funds have attracted
billions of dollars in new money in recent years and now oversee
about $1 trillion.
Surging assets and the proliferation of new managers have sparked
concerns that returns may fall as more traders chase a finite number
of investment vehicles.
In recent years, hedge funds have faced further challenges as
interest rates languished near record lows, credit spreads narrowed
and market volatility declined.
With fewer opportunities, some managers have taken on more risk in
search of higher yields, said Kevin Mirable, a partner at S3 Asset
Management, which provides prime brokerage services to the industry.
Now that interest rates are rising, credit spreads have widened and
volatility has picked up, some hedge funds may not be able to handle
the change, he added.
"These things are historically handled very well by hedge funds,"
said Mirable, former head of Barclays Capital's hedge fund services
group. "But there are a lot more hedge funds doing this now and
there'll be some that may have come into business in the past five
years that will really be challenged."
etc etc .. on ne parle que de ça en ce moment ...
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