This content is from: Portfolio

The Morning Brief: Kyle Bass is Betting on Subprime

Hedge-fund manager Kyle Bass is betting on subprime mortgages. The founder of Hayman Capital Management LP, who made big bucks in 2007 shorting the same paper, said he has bet half of his firm’s money on the appreciation of the riskiest mortgages. “We have more than half our money in subprime bonds,” Bass told Bloomberg. “You don’t like a pair of jeans at 200 bucks, but when they go on sale for $25 you look great in them.”

If you are a Twinkies fan and soon can’t find the iconic snack cakes in the stores, you may partly blame a pair of hedge funds. It seems Hostess Brands, the owner of the Twinkies — as well as other one-time American staples like Wonderbread and Ding Dongs — was unable to work out a deal with debt investors Silver Point and Monarch that would enable it to emerge from bankruptcy. The investors say the company was forced into liquidation when they were unable to hammer out a deal with the unions. The shuttering of the company will result in the loss of most of its 18,500 employees.

Man Group said it sold its exposure to the Lehman estates for $456 million to Hutchinson Investors LLC, which is managed by Seth Klarman’s Baupost Group. The Lehman claims, valued at $346 million on June 30, were acquired in July 2011 from certain GLG managed funds. Man said in a statement the proceeds will increase Man's regulatory capital surplus and further enhance its net cash position.

Activist hedge fund Starboard Value LP, which owns 14.8 percent of Office Depot, has called on the retailer to rescind the recent adoption of a “poison pill” rights plan. The investor is accusing the company of devising a scheme to preserve and entrench the board. Starboard also disclosed in a separate regulatory filing it cut its stake in MIPS Technologies to 8.3 percent from 9.3 percent. MIPS designs processors used for communications systems and consumer electronics.

Stephen Mandel’s Lone Pine Capital cleared out its entire stake in VanceInfo Technologies, a Chinese software developer. On August 24, 2010 the hedge fund had reported owning 6.6 percent of the stock.

Hedge fund QVT disclosed it owns 8.3 percent of Vivus, a drug-development company, and told the company it should put itself up for sale. In a regulatory filing, it said on November 14 it met with Vivus chief executive officer Leland F. Wilson following the company’s November 6 reporting of its quarterly results. QVT said it discussed the company’s plans for Qsymia, a weight loss pill it introduced in the U.S. on September 17, and its concerns about the company’s approach to marketing the drug. Vivus reportedly rang up $41,000 in Qsymia sales from its September 17 launch through the end of the month, well below analyst forecasts of about $310,000. QVT is also seeking a position on the drug maker’s board of directors. Qsymia, one of two new weight loss drugs on the market, seems to have serious side effects, including possible birth defects when taken by women in the first trimester of pregnancy. 

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