The Morning Brief: Fitch Ratings Lowers Outlook for Och-Ziff

Och-Ziff Capital Management Group is already suffering some fallout from its steep decline in assets in June. On Wednesday afternoon Fitch Ratings announced it lowered the New York hedge fund firm’s rating outlook to negative from stable. It also affirmed the firm’s Long-Term Issuer Default Rating and senior unsecured debt rating at BBB-.

The moves were made after Och-Ziff reported that assets under management fell by $3.2 billion last month, which works out to a 7.5 percent decline. “While the AUM decline was driven in part by performance pressure generally consistent with the broader hedge fund universe, outsized investor redemptions appear to be the primary driver” in Och-Ziff’s case, Fitch states in its announcement.

Fitch also speculates that when the firm’s bribery investigation is resolved, Och-Ziff “would likely begin to reverse” its current earnings drag due to its ongoing legal expense. The Securities and Exchange Commission and Department of Justice are investigating an investment by a foreign sovereign wealth fund in some of Och-Ziff’s funds in 2007 and investments by some of the funds in a number of companies in Africa. Shares of Och-Ziff fell 0.82 percent on Wednesday, to close at $3.60. The stock has now fallen nearly 90 percent over the past 14 months.

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Shares of hedge fund favorite Nortek surged more than 38 percent on Wednesday, to close at $86.50. The industrial products company agreed to be acquired by U.K.-based Melrose Industries for $86 per share, or $2.8 billion. Hedge fund firm Anchorage Advisor Management as well as alternatives firms Ares Management and Gates Capital Management — which own a combined 68.7 percent of Nortek’s stock —agreed to tender their shares, according to the press release announcing the deal. Other hedge funds that rank among the top-ten holders of Nortek include New York-based Silver Point Capital and Los Angeles-based Canyon Partners.

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Great day for the shares of Valeant Pharmaceuticals International. Shares of the embattled drug company surged 15.6 percent, to close at $23.06. However, the stock — the third most actively traded on Wednesday — is still down more than 25 percent from its closing price at the end of May. The stock reportedly moved on reports that drugstore giant Walgreens Boots Alliance said it’s “satisfied” with its relationship with Valeant.

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Purchase, New York-based Greywolf Capital Management disclosed it owns nearly 12.85 million shares of Cumulus Media, or about 5.5 percent of the major owner of radio stations. The hedge fund firm held positions in just seven U.S. stocks at the end of the first quarter, including about 10.1 million shares of Cumulus. Greywolf manages $3.5 billion in event driven and CLO credit strategies.

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