Error message

Deprecated function: The each() function is deprecated. This message will be suppressed on further calls in menu_set_active_trail() (line 2405 of /home/hulijedw/public_html/includes/menu.inc).

Ospraie Fund Closing and Other Lehman News

erku's picture

Ospraie Management, a US hedge fund specializing in commodities investments is closing its doors after punting 38.6% of investors' capital year-to-date. It seems investors want their money back and the fund has opted to suspend redemptions and conduct an orderly liquidation. How is this hedge fund's performance related to Lehman Brothers?

Back in 2005, in the middle of the great debt-fueled bull market for all assets, Lehman bought a 20% stake in the hedge fund. I'm sure that hedge fund stake has surged in value since then.

Moving on to other enlightening stories of how Lehman Brothers wisely chose to invest its capital during the boom, the WSJ has a story about Lehman's financing of SunCal, a developer that buys land, prepares it for houses and sells it to homebuilders. Actually, I'm sure SunCal used to develop that land and sell to it homebuilders, but now it just holds a bunch of vacant land in Southern California. In any event, Lehman has $2.2 billion in exposure to SunCal, which it has written down to $1.6 billion.

Lehman claims that much of the holdings are along the Pacific Coast where values have held up. Values always hold up nicely until someone with significant bills tries to dump a bunch of land into a market where there are few buyers. The SunCal investment is not a new revelation.

I wondered if the bank had taken enough of a markdown on this investment (as well as the Archstone REIT) given the pummeling in land values in SoCal on June 16th, after Lehman's earnings announcement. I suppose the Wall Street Journal felt a civic duty to point out to the Koreans exactly what they were considering investing in.

Despite all of the negative headlines, reports persist that multiple buyers are dying to buy the beleaguered investment bank. Consortiums of Korean Banks, HSBC, the Korean Military Fund, you name it. They all want a piece and are willing to pay a premium to book value! I'll believe it when I see it. If and when it happens, I will eat my crox.

Reported by Mock The Market

Add new comment