LibertyView Capital Management's capital structure arbitrage fund was up 1.3% in June, due in part to a play on Calpine Corp. The LibertyView Credit Opportunities Fund had been building a position in Calpine's first lien debt over the past few months. In April, this position helped contribute to a loss when rumors of a bankruptcy by the energy concern caused its entire capital structure to trade down. The fund hedged its position by shorting the company's junior debt, explained Brian MacHale, managing director.
LibertyView bought the debt thinking Calpine would not head into bankruptcy and may have to tender the notes. In June, the company announced its intentions to sell its natural gas assets to a subsidiary, which obligated it to tender its first-lien debt pursuant to bond covenants.
The roughly $197 million fund also took advantage of a tender offer by Saks through an event-driven trade. The department store received a notice of default from a hedge fund that held its convertible securities. As a result, LibertyView thought the company would be forced to tender its senior notes. The fund bought the bonds in the low 90s and within about 10-days, the company tendered the notes at par, said MacHale.
The fund is up 3.4% for the year through July, and was up 1.13% in July. The fund is managed by a team of three portfolio managers led by Randy Hutton. LibertyView, which manages roughly $1.75 billion, is a division of Neuberger Berman.