The Clinton Group last week sold more than $125 million in collateralized debt obligation securities, according to several CDO traders. And, while not a particularly large bid list given the improving liquidity in the secondary market, the CDO list generated a lot of buzz because of who the seller was, according to traders. They speculate the hedge fund needed to raise cash quickly to meet redemption requests from its institutional clients. The redemption rumor comes shortly after Tony Barkan, a senior partner, quit the Clinton Group last month over portfolio valuation issues, as first reported on BondWeek's Web site (www.bondweek.com, 10/31). It could not be determined if the sale was done to meet redemption requests or as part of the Clinton Group's regular positioning of its CDO book. Ted Petroulas, executive v.p. and Barkan's replacement, did not return a call and Ed Rowley, a spokesman for the Clinton Group, was unable to comment by press time.
The headline risk associated with Barkan's departure may have caused some of the Clinton Group's institutional clients to pull their investments, traders speculate. "They are trying to get rid of the more-liquid, senior, triple-A paper and the speculation is that it's due to redemptions," says one trader at a top CDO market maker.
CDO traders say Clinton Group was also selling senior asset-backeds and corporate bonds, though traders in these markets could not confirm this. Specifically, the Clinton Group last week asked dealers to bid on a $127 million list of six transactions, containing loan- and trust preferred-backed liabilities, according to traders who bid on the list. Although Barkan quit over valuations on hard-to-price securities, presumably including equity pieces Clinton Group had retained from CDOs in which it acted as collateral manager, traders say the hedge fund last week unloaded clean, senior bonds--which are easiest to value and most liquid.