Morning Brief: Aurelius Versus Puerto Rico

Mark Brodsky’s Aurelius Capital Management, which owns more than $400 million of defaulted Puerto Rican general obligation bonds, goes to federal court Wednesday to present oral arguments regarding its effort to undo Puerto Rico’s bankruptcy.

High-powered lawyers will represent both sides. Gibson Dunn partner Ted Olsen, George W. Bush’s solicitor general, will argue for Aurelius, while Donald Verrilli, President Obama´s former solicitor general, will represent the Puerto Rico Oversight, Management, and Economic Stability Act (Promesa) board.

Promesa is a 2016 law that created a bankruptcy process for Puerto Rico that is being managed by an oversight board whose members were appointed by Congress, which Aurelius claims is unconstitutional The Trump administration, however, supports the law and has written a brief to that effect

The event in federal judge Laura Swain’s court is likely the biggest event of the year for the Puerto Rican bankruptcy, says Puerto Rican attorney John Mudd.Aurelius’s effort is earning scorn during the post-Hurricane Maria era. “Other financial creditors may be too chastened by the ongoing devastation facing the residents of Puerto Rico from Hurricane Maria to use a major constitutional battle in the hopes of collecting a few more cents on the dollar under such circumstances,” writes Melissa Jacoby, professor of law at the University of North Carolina, on CreditSlips, a blog that covers “credit, finance and bankruptcy.”

“Puerto Rico has the extra burden of confronting Hurricane Aurelius,” she writes.

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D. E. Shaw has sold its stake in Spotify ahead of an initial public offering of the streaming music service, according to Sky News.

The hedge fund firm, which bought the shares in 2015, last month sold 12,000 shares at $4,060 a share, valuing the company at just over $16 billion, Sky News said.

D.E. Shaw doubled its money on the investment, according to Sky News.

The firm declined to comment.

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Paris-based Verrazzano Capital, a $600 million hedge fund, is returning money to investors and turning itself into a family office, Bloomberg reports.

Chief Executive Officer Guillaume Rambourg told Bloomberg that “The funds are at their absolute peak performance.”

But, he added, “in my 23rd year in the business of managing money all day, every day, I’ve decided to embark on a new life path.”

Verrazzano’s European Opportunities Fund rose 1.7 percent through November, and a European Focus fund was up 3.3 percent, according to an investor letter quoted by Bloomberg.

Rambourg started the fund in 2011. He previously managed funds at Gartmore Investment Management but was suspended during an investigation into “possible breaches of internal procedures, though a Financial Services Authority’s investigation ended without any disciplinary action,” Bloomberg said.