Basis Capital, a relative value/arbitrage hedge fund in Sydney with AUD20 million (USD10.2 million) under management, recently purchased credit default protection on Australian packaging firm AMCOR to hedge a long position in convertible bonds issued by the company. Steve Howell, cio in Sydney, said the hedge fund purchased protection at LIBOR plus 60 basis points. He declined to reveal the notional size, tenor or counterparty.
AMCOR recently issued at par a convertible that pays a 8.5733% coupon and has a conversion value of USD$105.26, Howell estimated. The convertible was recently trading at a premium and Basis believes its value should continue to rise to reflect the conversion value.
