John A. Levin & Co. is close to putting the final nail in the coffin of the Levco Debt Opportunity Fund. The firm decided to liquidate the fund, which did not have performance problems, because it was unable to reach an agreement with the team managing its event-driven funds. It had planned to make an initial distribution of 75% of the fund's net asset value the second week in December, according to an investor letter. Levin had anticipated another distribution in December with the remainder during the first quarter of 2006.Stuart Kovensky, portfolio manager, declined to comment.
John Levin has fully transacted the portfolio, but some of the trades still need to close because the fund had a significant bank debt allocation. There are also a few positions that are marked at zero, and the firm will be forming a liquidating trust for these investments, according to the letter. "Examples of these types of positions include Parmalat and Safety Kleen, which are placeholders for potential further distributions from litigation or restructurings," the letter says.
The fund was up 76 basis points in October and an estimated 75 basis points in November. In October, the fund's long position in General Motors Acceptance Corp. bonds rallied following news that General Motors was seeking to sell a majority stake in its financing arm.
Although some Parmalat holdings are being placed in the liquidating trust, some of the fund's claims in the bankrupt dairy concern were converted into equity that was listed on Milan Stock Exchange, which helped performance, the letter says. "[The fund also] owned one resolved claim in the Mirant reorganization, which was resolved to the full satisfaction of our creditor group in early November and caused the paper to trade up nicely."