RockView Management's RockView Partners is shorting the bonds of movie rental giant Blockbuster as the company wrestles with dropping revenue. Kevin Schweitzer, portfolio manager, said the firm believes the company is facing dire straits after it eliminated its late fees, which is costing the company hundreds of millions of dollars in revenue. With the elimination of late fees and movie rentals down industry-wide, there are few options to help pick up the slack. The fund recently increased its short position in Blockbuster, anticipating further financial woes for the video rental company following Hurricane Katrina, where in areas affected by the storm face loss of revenues and inventory as well as property damage. Calls to Blockbuster were not returned by press time.
The firm also made plays on newspaper insert printer Vertis, going long on the company's senior debt and shorting its subordinated debt. The company's bonds have recently been downgraded, which netted the fund a profit. Rockview also looked at Vertis'competitor, Quebecor, and made a directional short on Quebecor.
RockView is a $130 million multi-strategy fund that invests in capital structure arbitrage, relative value equities, merger arbitrage, special situations and structured products. The typical holding period is usually one year or longer. "We're not looking for a quick trade," Schweitzer said. The portfolio has 130 investments across 26 industries. The RockView Partners fund is up 7% through mid-September.
